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THE DEVELOPMENT OF 
ECONOMICS 

1750-1900 



BY 

O. FRED BOUCKE 

PBOFESSOa OF ECONOMICS AT PENNSYLVANIA 

STATE COLLEGE 
AUTHOR OF "the LIMITS OF SOCIALISM** 



THE MACMILLAN COMPANY 
1921 

All rights reserved 



^loyy 



PRINTED IN THE UNITED STATES OF AMEEICA 



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Copyright, 1921, 
By the MACMILLAN COMPANY 



Set up and printed. Published September, 1921. 



SEP 2i 192. 



§)CI.A624451 



PREFACE 

The main purpose of this short history of economics 
as a science is to< help students find a perspective for a 
large variety of facts whose connection and common 
ground may be easily lost sight of; and beyond that to 
show with some degree of definiteness how far economics 
even today rests on concepts worked out during the 
eighteenth century. 

To attain these two ends the writer has ignored some 
material that should properly have a place in a more 
comprehensive survey. He has decided to depart from 
custom and to treat, not individual writers or small 
groups of them, but only those currents of thought as a 
whole which differ in fundamentals, and have long since 
been recognised as of primary importance in the de- 
velopment of political economy. For this reason all 
systems have been reduced to four, and each system 
furthermore^ — with the exception of Historism — has been 
subdivided into two parts, the first dealing with the pre- 
suppositions that were borrowed from philosophy, logic, 
ethics and psychology, and the second with definitions and 
laws such as have always formed the main body of eco- 
nomic doctrines. It will be found, of course, that this 
necessitated an overlapping of periods, besides at times 
making difiicult the decision as to the division to which a 
writer should be assigned, considering the scope of his 
ideas and several modes of approach. But on the other 
hand, such a simplification has a distinct pedagogical 
value, provided we aim at an outHne sketch rather than at 



VI 



PREFACE 



a complete picture, whose details detract so often from the 
principal theme. 

In the belief that quotations are appropriate whenever 
the text treats of new facts or involves a re-interpretation 
of old facts, excerpts from many sources, both of economic 
and of non-economic literature, have been woven into the 
argument; but it is hoped that this will prove an aid to 
beginners and perhaps stimulate inquiry into the sources 
themselves. Indeed, to meet the interest particularly of 
college students, references have usually been added in 
footnotes, and a bibliography is provided to facilitate a 
more detailed investigation than is afforded by general 
histories of the subject. 

In conclusion, the writer begs leave to add that this 
review was originally undertaken preparatory to a 
critical estimate of present economic theories, of their 
characteristics and possible development — an estimate 
that he expects to complete in the near future. Such a 
critique he deems to be the main task of economists today, 
and he would consider the review now before the reader 
as having fallen short of its goal if it did not help him 
to appreciate some of the perplexities that at present 
confront the economist both here and in Europe. 



TABLE OF CONTENTS 

CHAPTER ONE pages 

Introduction 1—1 5 

CHAPTER TWO 
The Premises of Naturalism 16-61 

CHAPTER THREE 
The Principles of Naturalism 62—91 

CHAPTER FOUR 
The Premises of Utilitarianism . . . . . 92—142 

CHAPTER FIVE 
The Principles of Utilitarianism 143-184 

CHAPTER SIX 
Historism 185-225 

CHAPTER SEVEN 
The Premises of Marginism . 226-286 

CHAPTER EIGHT 
The Principles of Marginism 287—314 

CHAPTER NINE 
Conclusion 315-328 

Bibliography „• r.i . w . . 329-342 

Index 348-348 



CHARTS AND TABLES 

CHARTS 

PAGE 

Chart One: Genealogy of British Utilitarianism . 48 
Chart Two: Genealogy of Social Science .... 60 
Chart Three: Sources of John Stuart Mill's Psychology 135 

TABLES 

Table One: Characteristics of Smithian and Ricardian 

Economics Compared 114 

Table Two: Order of Treatment of Main Subjects in 
Representative Treatises on Economics Since 
1776 152-153 

Table Three: Main Doctrines of the Founders of 

Marginism Compared 232-235 

Table Four: Space Assigned to Special (Applied) 
Problems in American Treatises on Economics 
since 1820 SIS 



THE DEVELOPMENT OF 
ECONOMICS 



CHAPTER ONE 
INTRODUCTION 

The Genetic Viewpoint. — There is a history for nearly 
everything because life is more than an arithmetical 
proposition. If our experience consisted merely of an 
adding or subtracting of magnitudes perfectly definite 
and comparable, it might have the merit of simplicity, 
but few would like its monotonous course. What gives 
spice to life is variety, and one principal test of variety 
is the difficulty we find in trying to equate things. When 
many kinds of elements must be correlated, when inter- 
action is more than a parallelogram of forces as me- 
chanics knows it, then events take place which are the 
very essence of History. 

History deals with processes in time, or perhaps is 
time itself, because it consists of changes by which, in 
the last analysis, time becomes measurable. Each indi- 
vidual makes his own history, since his experiences are 
largely of different sorts and cannot be put together 
like the components of a sum. We associate history with 
larger groups only, because we ascribe to them an im- 
mortality which is not really theirs. For the members 
of any group, however mighty, die in due time; what 

1 



2 THE DEVELOPMENT OF ECONOMICS 

survives is a set of relations with which we have, coh- 
sciously or unconsciously, identified that group. Con- 
sequently the history of a nation offers interesting ma- 
terial for study, each of us seeing a part of his self re- 
flected in the personality of the whole. Yet, whether we 
write autobiography or universal history, the fundamen- 
tal fact is always that of change. The older we grow, 
the greater the fund of facts for a narrative, the more 
noticeable the transiency of things, thoughts, structures 
and functions. Nothing proves to be quite permanent. 
All items are subject to revision and destruction. Rela- 
tive values alone can be established, except that the notion 
at least of an absolute must exist if its opposite is to 
become logical. 

Both science and common sense have turned increas- 
ingly during the last century to this aspect of relativism. 
Not autocracy but democracy, i. e., rights and duties 
properly related to common ends, not universalism but 
the territorial origin of laws and ideals, not transcen- 
dental realities that experience will never prove, but 
knowledge born of the senses and variable with person, 
time, and place; not isolation for self-sufficient individ- 
uals, but interrelations which make each one an integral 
part of a larger whole — such are the modern contrasts 
that make clear the issue of absolutism versus relativism. 
The question is not whether ideals may exist or pictures 
be imagined that reach beyond the world of sense, but 
whether, so far as the past has shown, our constructs are 
imperishable, our standards eternally the same, our 
applications successful according to plans. And here 
the answer is as unequivocal as it is easy: the whole his- 
tory of thought testifies to the relativity of our under- 
standing. Nothing is quite certain. Nothing holds good 
for more than a time. The truths that have been recog- 



INTRODUCTION 3 

nized'from the beginning of civilization and cherished ever 
since as axiomatic are few indeed. In relations with our 
fellowmen certain needs and reactions may be said to 
prove the constancy of human nature; but even here our 
records are incomplete. 

The historical standpoint therefore is natural enough. 
It must always puzzle the student of science that the 
relativity in time and space of all human values was so 
late in being built into a comprehensive theorem. Where 
change is so universal and persistent, how could men fail 
to grasp the principle while noting the facts? The 
Orientals and the Greeks of course had known both in a 
general way, but a definite formulation with conclusions 
to guide us in our quest for truth did not come until very 
recently. 

The historical viewpoint is now only a species within 
the genus Genetics. The genetic outlook comprises the 
sum total of changes about us, while the historian devotes 
himself particularly to the elucidation of human activi- 
ties and judgments. What is true of the cosmos is proven 
to be doubly applicable to man, namely, that change is a 
rule without exceptions. Change as motion and inters 
action in the physical and chemical world. Change as 
metabolism, growth, and decay. Changes of habits and 
opinions, manners and wishes and needs. Changes of 
which only the scientist can become convinced, because 
they take place so slowly that the senses will not per- 
ceive them. Changes in flora and fauna, of earth and 
the cosmos, and of man whose records more especially 
interest us. Everywhere the same law. A becoming, 
waxing, and waning. A series of stages more or less 
open to inspection. Continuity amid variations. Differ- 
ent rates of change, and overlappings as between different 
fields of action, but always a binding link, a correlation 



4 THE DEVELOPMENT OF ECONOMICS 

traceable after due inquiry, a possibility of explaining 
how and when and where the modifications affected the 
object in question, our beliefs and customs, our sciences 
and religions, our modes of living and public policies. 
The genetic principle proves equally fruitful whether we 
study creed or deed, things or thoughts, politics or 
economics. 

History, then, has value even though we deny its appli- 
cation to ethics. The lesson may not be one to guide 
our future conduct or to suggest formulae which science 
by itself cannot frame. But nevertheless there are advan- 
tages in sight. For whether history is written simply 
to tell how things really happened, — as Leopold von 
Ranke said, — or whether we hope from the beginning to 
shed light on the present by scanning the records of the 
past, the benefit remains the same. Information is ours 
in both cases. The use to which we put it is no concern 
of the historian, though, to be sure, it is a foregone 
conclusion that a valuation of some sort has occurred. 
For, in the words of the poet: 

"My friend, the times gone by are but in sum 
A book with seven seals protected 
What spirit of the times you call 
Good Sirs is but your spirit after all 
In which the times are seen reflected." 

It is practically impossible to speak of the past without 
putting into it something of the present. Retrospects 
necessarily are partly prospective. As we look forward 
or around us, we behold times gone by, whose life becomes 
intelligible only as, at one point or another, it connects 
with our own. Historians consequently dare not hope 
to be mere assemblers of facts, even if they wished to. 
The fact itself is little or nothing, the interpretation 
much or everything. The value put upon events of the 



INTRODUCTION 5 

past is the core of historiography. By consulting human 
nature we are enabled to reconstruct the motives and 
materials of an earlier epoch, but though this reasoning 
from analogy will always be at the bottom of historical 
research, the externals of life vary sufficiently to influ- 
ence us to-day when we rehearse the happenings of yester- 
day. The present arose out of the past, which may help 
to explain the former. To judge rightly on the faults 
or merits of existing institutions we must follow them 
back to their sources and intermediate stations. All this 
harmonizes with our modern habit of prefacing a critique 
of what is with a review of how it came into being. But 
we are at the same time to remember the pragmatic nature 
of historical research, the limited value of any attempt 
to portray faithfully a situation no longer before us. 

The Economic Interpretation of History The founders 

of socialism helped to set us aright in this matter 
by their blunt assertion that history becomes explicable 
in the light of economic conditions. They overlooked or 
disparaged the power of existing thoughts and prejudices, 
and magnified the force of external circumstances. They 
said: Yes, you can find out just exactly what people 
were and did and wanted and believed at any given period, 
but you must first study the economy of that period. 
A real world existed then as now. Your knowledge of 
it may be pretty definite, and true to things as they 
actually were. It is not a question of being under the 
sway of your personal notions or of your Zeitgeist, but 
of being willing to look for solutions where alone they 
reside, in the modes of production and exchange of goods. 
Whatever the laws or the philosophies or the religions 
or the customs of the time, be sure to connect them with 
the economic background, and do it so that the causal 
relation runs consistently from the latter to the former. 



6 THE DEVELOPMENT OF ECONOMICS 

For the economic interpretation of history is the only 
accurate one. No other can suffice. To understand the 
speculations on property and government of any one 
epoch relate them to the mode of living of its people, 
to their social organization as dictated by principles of 
production. Histories of thought do not run in a con- 
tinuous thread from one century to the next, but rather 
by installments, each one of which receives its stamp 
from the economic substratum whence it was derived. 
Each age — defining it as a particular system of economic 
organization, production, and distribution — ^has its own 
intellectual peculiarities, and continuity between them 
will appear only in so far as customs or creeds gather 
a momentum that carries them beyond the time to which 
they properly belong. Principles of social heredity 
therefore cause curves of thought that depart somewhat 
from economic lines of division, but nonetheless the gen- 
eral principle obtains. 

This is the view often known as economic determinism. 
If one had to accept it, a historical sketch of any one 
science would be impossible without constant reference 
to facts which the specialist might master perfectly, but 
whose significance for the scientist in question it would 
be difficult to ascertain. One would have to ask: Which 
economic data should be made to bear on which detail 
of the doctrines under examination, and who is to judge 
for both? 

Luckily, however, one need not interpret the rule too 
narrowly, for in several respects authority is against it. 
Men, for instance, have written excellent, illuminating, 
and elaborate histories of thought, religion, customs, and 
other phases of life without obeying the law of economic 
periods. An intimate relation between creed, conduct, 
and condition has usually been shown to exist, but each 



INTRODUCTION T 

one has had significance independent of the other. But 
furthermore, in the testing out of the theorem it has 
become evident that the main point is not whether cross- 
references may be advisable or even necessary — for most 
historians would grant so much — but whether economic 
conditions possess a causal force, an exclusive power of 
explanation without which all else remains obscure. And 
here psychology as well as the direct evidence of facts 
has, on the whole, favored the opponent more than the 
friend of the Marxian doctrine. 

For if psychology proves anything it proves the 
incommensurability of ideas. The economic interpreta- 
tion of history gives us to understand that a more or 
less fixed ratio exists between systematic thought and 
the concrete facts of economic life. Ps^^^chology, how- 
ever, is definite in declaring the flexibility of such a rela- 
tion, indeed the impossibility of establishing any ratio 
between the two factors involved. Stimuli from without 
are not the only ones to consider. Economic circum- 
stances do not alone act upon us. One stimulus may end 
in several responses, and one response may have to wait 
upon a congeries of stimuli, either all issuing outside of 
us, or partly aroused from within. Perception is a 
peculiar compound of primal elements originating in sen- 
sation and association. A chemistry is continually going 
on that makes unrecognizable a train of thought if we 
were to judge it merely by its objective origins. 

Consciousness comprises the three fundamental proc- 
esses of sensation, selection, and retention. An idea, as we 
grow from babyhood into adolescence or old age, under- 
goes innumerable changes in its constituencies. Inhi- 
bition is increasingly at work. We select only a few of 
all the potential excitants around us. Percepts conse- 
quently are the result of eliminations as well as of addi- 



8 THE DEVELOPMENT OF ECONOMICS 

tions and corrections, of shifting in stress and reassem- 
bling of parts into a variable focus. Invention cannot 
be measured by the tangible or intangible facts of wealth. 
Innovation is at least as self-sufficient as production of 
goods outside. What new thought, what new ideal, what 
new application will spring from older ones due, in a 
sense, to certain assignable economic facts, no one can 
predict. The relation between these forces is not a 
quantitative one as socialists have maintained. And for 
this reason economic data cannot be indispensable to the 
explanation of successive emanations of the mind. Intel- 
lectual history stands on its own ground. Or in the words 
of a competent authority: "The movement of thought 
might be regarded as an interaction of purposes and 
environment, each of which in some measure modifies the 
other. At least no interpretation and no improvement 
can be considered as a discrete event. It has its meaning 
in, and its appearance and development is controlled by, 
wider mental and physical contexts. These serve to 
determine the nature of the appreciation and to give the 
desire that leads to the particular improvements. In this 
way the progress of thought is one continuous operation. 
No part can be understood unless it is considered with 
the whole." ^ 

There are objective tests for this contention in the 
annals of history itself. It can easily be shown that the 
rehgion or philosophy of an age may vary greatly for 
different nations even though their modes of production 
and distribution are substantially the same. Or the con- 
verse is true, since with quite different economic con- 
ditions the trend of thought has been nearly the same 
for all. Any comparison of acts of legislation, meta- 
physical systems, world religions, moral standards, and 

ipillsbury, W. B. Psychology of Reasoning, p. 286. 



INTRODUCTION 9 

literary or art achievements will illustrate the principle. 
Or one might watch the growth of ideas in an individual 
from boyhood to old age. The conditions of work and 
consumption may remain constant, but the accession of 
ideas, including those not peculiar to the given general 
economic environment, will go on, engendering feelings 
and characteristics of conduct virtually independent of 
those conditions. 

In the end, however, the crux of the question lies in 
the definition of "economic" and of "cause." What 
precisely is meant by an economic fact? In what sense 
can anything be the cause of something else? The 
answer for both is : We know only by definition, that is 
by hypothesis. An economic fact is not an isolated indi- 
vidual any more than any other circumstance. We are 
face to face with complexities that to untangle into two 
elements, the economic and non-economic, would be a 
trying task. We accept distinctions because they serve 
to emphasize aspects or to focus our attention upon par- 
ticular purposes ; but any condition such as that of pro- 
ducing a bushel of wheat involves as much the inter- 
action of minds in all their powers and parts as a belief, 
say, in the Nicasan Creed. The discoveries of science are 
correlations, and not causation in a straight line. What 
experience brings out continually is the interdependence 
of events, not their growth from one single taproot that 
might feed all else. We can tell something, but not every- 
thing, from the groundwork of a structure; neither can 
we infer a great deal as to the foundations by studying 
the upper parts alone. Which is to be emphasized in 
describing the building, where we are to begin and how 
we are to appraise its features, depends more on what 
we expect from it than on any particular class of mate- 
rials employed. Histories of thought for these reasons 



10 THE DEVELOPMENT OF ECONOMICS 

have been written again and again free of economic 
allusions, and good judges have approved, so long as 
the general canons of historiography were not lost sight 
of. Selection, balance, sequence, clarity and force, these 
have ever been essentials. The interlacing of the economic 
and the non-economic must be left to the student, whose 
lyiethods will doubtless be individualized to a certain 
extent. 

Lessons of History. — What history however does show 
is the periodic recurrence of an optimistic and pessi- 
mistic attitude toward the subject under investigation. 
One soon finds, on scanning the annals of intellectual 
development, that a skeptical turn of mind becomes 
common among philosophers when certain conditions have 
been fulfilled that do not prevail equally at all times. 
Constructive and destructive periods alternate. A criti- 
cal spirit arises when maladjustment of savants to their 
subject exceeds a given point, when the old and the new 
in beliefs conflict, when needs and creeds move in opposite 
directions or at divergent angles, when the conclusions 
of one science cease to harmonize with the premises of 
another. Transition periods are proverbially scornful 
of established sanctions ; or should we say, when the old 
proves worthless anything novel has charms? No mat- 
ter. There are ascending and descending epochs of 
research. We have pioneers in one, and iconoclasts in the 
next ; minds who answer our questions, and those leaving 
nought but wreckage. Mankind at large does what indi- 
viduals must do now and then, namely, take stock of 
what they have and lack, of what they think they ought 
to have. Or, to change the metaphor, mankind and 
thinkers in particular, are like travelers on a long 
journey, whose goal is not always absolutely certain, 
whose maps prove unreliable, whose equipment needs 



INTRODUCTION 11 

repairing bit by bit, whose search for shortcuts and 
easier paths may be rewarded, but also frustrated. There 
is the disposition to pause and ponder, to change one's 
mind or to see the landscape from changing standpoints ; 
and this influences history no less than religious con- 
versions. 

A critique, likewise, may turn either to details or to 
cardinal points in a doctrine. We may disagree with 
the conclusions in general or with a few of a consider- 
able mass. We may fail to see the validity of premises, 
or detect fallacies in deduction, or take exception to 
technical devices for measurement and correlation. 
Where verification is out of the question reasoning is 
more likely to be scrutinized closely than in cases that 
lend themselves readily to an objective test. If the per- 
ceivable facts about us belie a statement of science it 
will not be long before the critic has made his point. 
Otherwise a more arduous duty is before him. Sciences, 
e. g., claim methods in part peculiarly their own, or they 
rely upon premises which form the end results of another 
group of inquiry. The instruments for computation are 
perhaps found to lack more than the accustomed degree 
of precision; or conclusions and premises meet with 
approval, but the way they are coupled together pro- 
vokes our censure. The history of any one science such 
as economics may therefore be attacked from several 
points, but what counts finally is not the length of 
argument or manner of exposition, but the net sum of 
revisions deemed necessary. Results once more measure 
effort ! 

Now, as regards the science of economics, the critical 
approach will be either predominantly practical or theo- 
retical; and any review of its growth is likely to exhibit 
here and there the choice made. 



12 THE DEVELOPMENT OF ECONOMICS 

In a utilitarian spirit we may point to the existing 
socio-economic evils, of which there are surely enough, 
and ask whether they are an unavoidable part of prog- 
ress at any given stage, or chiefly the result of mistakes, 
of ignorance, and carelessness that will automatically 
correct itself as soon as social processes are studied more 
earnestly than they have been up to date. In recent 
years of course students of these phenomena have been 
given a hearing and somewhat of a chance to test the 
applicability of their doctrines. People have been will- 
ing, in growing number, to accept the opinion of special- 
ists. However, on the other hand, the skeptical attitude 
has always seemed natural because of the elusive charac- 
ter of so much that is important in social investigation. 
Men have despaired of getting light on their practical 
questions by going to the theorist. The prevailing note 
has been: Economics has been over-confident, not to say 
over-pretentious and officious. Evils will continue to 
exist because no rationale of meliorism will ever be found, 
because there is no such thing as a scientific, systematic 
way of improving the lot of mankind. Progress is real, 
but it cannot be forced. Economics, therefore, has been 
a failure and will go on failing in so far as legislation 
must designedly ignore it. Rough estimates alone are 
possible. A knowledge of human nature gained at first 
hand is safer than any amount of abstraction oifered 
by experts. 

Scientists, however, will not dismiss the subject so 
lightly. To them the theoretical approach to any 
critique of their work or that of another is the only one 
worth while. As they see it, the important thing is not 
an assigning of guilt or an acquittal from a moral stand- 
point, but a probing into data, methods, and conclusions 
so far as a science has reached any. The ever repeated 



INTRODUCTION 13 

query is : Do the principles enunciated square with the 
facts? Do they reflect the best knowledge of the day 
in allied fields of research? Do they rest on sound reason- 
ing and a correct use of hypotheses ? As to the now domi- 
nant economic system, for instance, is it self-consistent 
and fashioned out of materials, with the help of premises, 
that meet our experiences where they are available? And 
so far as the premises are concerned, on which hinges so 
much, do they substantially agree with the verdict of the 
science whence they were taken, or are readjustments and 
cancellations in order? 

It is undoubtedly true that some sciences, in spite of 
the revisions found necessary from time to time, have 
nonetheless a residuum that is continuous and as near 
axiomatic as experimental methods can make them; while 
the social scientist or the philosopher treats of questions 
apparently never settled. The revaluation is partial in 
one case, and complete in the next. The alterations occur 
seldom in the first instance, separated by long intervals 
of time, and frequently in the next where one viewpoint 
seems as legitimate as a second and third. How are we 
to explain this difference, how to remove it if we can, 
how to accept it and yet feel entitled to the most serious 
consideration by outsiders? The question is as old as 
it is possibly unanswerable, but a severely critical attitude 
toward, e. g., economics must reckon with it sooner or 
later. 

The larger issue raised a while ago takes on therefore 
a more engaging aspect. One is constrained to inquire 
just exactly what science is anyway, what the tests for 
any one, what the limits within which methods or applica- 
tions may vary. The history of economics abounds in 
attempts to find a solution of this problem. From the 
outset men have sought to prove the scientific nature of 



14 THE DEVELOPMENT OF ECONOMICS 

economics, to formulate definite laws of much breadth of 
operation and lasting value. The idea of law has 
engrossed philosophers and social scientists more per- 
haps than the investigators who have furnished the bulk 
of our scientific information. Again and again leading 
economists have expatiated on the inward nature of social 
regularities, on means and ways for getting at them, 
on initial steps by which a deductive or inductive mode 
of inference should assure us permanent fruits. To find 
truths independent of a single system of production or 
exchange, to make applicable to all nations what the life 
of any one revealed, to bring under a single central theme 
the richest variety of phenomena, all this has been the 
ambition of a Smith, Mill, Carey, and Jevons. Nothing 
was neglected to make conclusive the argument brought 
before the reader. The whole range of topics, once the 
sphere par excellence of philosophy, was scanned in order 
to find unity amid diversity. Thus a history of economics 
has to deal incidentally with questions not turning on 
price, distribution, or production. The founders culti- 
vated a broad viewpoint. They strove to get at the roots 
of an ultimate problem of prosperity, explaining not 
merely why supply and demand are equalized, but how 
the weal of mankind might be deliberately fostered. In 
other words, pragmatic and purely theoretical aspects 
were never separated completely. It was a persistent 
search for ultimates rather than for values immediately 
at hand. 

Hence the recurrent inquiry into what is fact and what 
fancy, what the relation between things and thought, what 
the control exercisable by mind over matter. Economists 
from time to time made these queries basic to others. 
They wished to know what reality was, what the nature 
of control or of causation, of law and will, of truth and 



INTRODUCTION 15 

virtue, and the relation of one to the next. The Is and 
the Ought, repetition in history and possibiHties of prog- 
ress, such and Hke fundamentals were touched upon by 
men whose nearby field was wealth and income. A critic 
of economics in its present condition must take cog- 
nizance of these speculations, and the historian must 
record them if his survey is to have a perspective. 



CHAPTER TWO 
NATURALISM 

I. Antecedents 

The Birth of Science. — The study of economic sub- 
jects is no doubt almost as old as the history of man- 
kind. It may safely be conjectured that men could not 
reach a high degree of civilization without busying them- 
selves with the pros and cons of the manner of their 
living, of the sources of their weal and woe, of the ways 
and means available for improving their lot — all of which 
topics are, in their very nature, economic. What is 
more, we know that economic regulations had already 
become quite comprehensive in early Babylonian days, 
to say nothing of the meritorious part played by Greeks 
and Romans long before the advent of the Christian era. 

If however we wish to find the beginnings of economics 
as a science we need not go back as far as antiquity, nor 
even much beyond the middle of the eighteenth century. 
For the astonishing revival of economic thought that 
characterized the period of 1500 to 1750 was not accom- 
panied so much by definite attempts at systematizing 
results, as by marked additions of knowledge on a variety 
of subjects, part of it being given a universal value, 
but most of it bearing on problems of national policy. 
Strictly speaking these studies of Kameralists and Mer- 
cantilists lacked a scientific character because the thought 
had not yet dominated them that social processes follow 
laws, and admit of measurement or deductive treatment 

16 



NATURALISM IT 

exactly as physicists had reduced their own manifold to 
a few grand principles of matter in motion. Only with 
the appearance of the Ph3^siocrats does economics cease 
to be a loose bundle of individual facts. Now for the 
first time a unifying code is sought and proclaimed to 
exist. Now surveys are made and theorems submitted for 
others' approval which overshadow whatever significance 
may be attached to the earlier literature. 

Still, it would be a mistake to ignore the great impetus 
given to economic studies by the period of transition from 
medieval to modern times. The great bulk of our modern 
exact knowledge can be traced back to this period of re- 
awakening and searching whose advent had been so long 
prepared, and whose ultimate achievements so completely 
transformed the world. 

During the Middle Ages nothing had been as firmly 
rooted in the minds of people as the need and goodness 
of authority. The guiding slogan of leaders was faith 
and submission. Authority was everything because its 
chief purpose had been announced in the Scriptures, and 
its sole oracle was the papacy — with all that that term 
implied. Authority of course has always existed and 
can therefore not be mentioned as a peculiar feature of 
the so-called Dark Ages. What was a distinguishing 
mark was the acceptance of authority even when the evi- 
dence of the sense contradicted it, or might easily have 
been invoked to contradict it. Authority in all matters^ 
such was the axiom for high and low. It was not a case 
of submitting to hearsay because its teachings had been 
verified, or might at any time be proven correct to the 
satisfaction of doubters, but rather of extending the 
mandates of theology to other questions where tests might 
naturally suggest themselves. 

The Middle Ages therefore stood for the maintenance 



18 THE DEVELOPMENT OF ECONOMICS 

of a status quo as nearly as the practical and spiritual 
interests of Church or State advised it. The illiteracy 
of the masses was as much a help for preserving order as a 
hindrance to the dissemination of knowledge. The Holy 
Roman Church and the Holy Roman Empire worked 
hand in hand to fortify their creed of submission. Pa- 
tristic literature and papal decrees, the Bible as officially 
placed at the disposal of the priesthood, the verdicts of 
Ecumenical Councils, and the codifications of law and 
dogma by great scholars like Gratian and Thomas 
Aquinas — such were the repositories of creed that none 
were permitted to impugn, whose power remained sub- 
stantially intact for nearly a thousand years. 

Of ancient writers Plato most enjoyed the esteem of 
the hierarchy until the twelfth century. After that 
Aristotle gained favor with the clergy, and even more 
with many of the secular students who now congregated 
around universities or pursued their studies independent 
of official recognition, content to search truth without 
encouragement, somewhat in the spirit of heroes and 
heretics. For the most part a foreign medium inter- 
vened between author and pupil. The Greeks were inter- 
preted through Arabians whose commentaries won great 
fame. Roman works not infrequently circulated in 
medieval Latin, a variant and mutilation of the Cice- 
ronian language. Studies from the sources were as rare 
as they were held unnecessary to a correct appreciation 
of ancient thought. 

In fact, learning was not in any case a virtue of 
fundamental importance. Not knowledge but faith was 
the guarantee to salvation. The needs of the soul had 
no relation to the inclinations of the body or of an active 
mind. Asceticism ranked high because to forego things 
seemed more wholesome than to demand things. Suffer- 



NATURALISM 19 

ing in a measure took the place of service. To undergo 
tortures might benefit man more than to enjoy comforts. 
The value of this life on earth consisted in its oppor- 
tunities for purifying the soul, for ridding sinners of 
their handicaps in a quest for the eternal life to come. 
What the priest did was consequently more important 
than the guidance of teacher or legislator, although the 
Church did support both, and indeed was throughout the 
Dark Ages the prime agency for enlightenment and 
moral uplift. 

After the thirteenth century, however, the Church was 
undergoing a decline. Just as the authority of mon- 
archs, dukes, and barons suffered at the hands of a 
rebellious bourgeoisie whose fate seemed bound up in- 
separably with economic and legal liberties, so the hier- 
archy found insuperable difficulties in trying to curb 
skepticism. A new view of life was being crystallized. 
A turn-about of opinions and purposes took place which, 
by the sixteenth century, had definitely conquered the 
medieval order. Principles were now being announced 
that could not but overthrow hallowed customs. The 
center of interest shifted, so that in the end a series of 
problems came to the fore, the solution of which was part 
of the task assigned to economics. 

This rebirth of an older philosophy, this Renaissance, 
as it has fitly been christened, began in the first place 
with an enthusiastic movement for the exploration of 
pagan antiquities. Greek and Roman civilization now 
more than ever preoccupied the minds of plodding stu- 
dents. Barbarism, instead of being associated with 
heathenism, now came to mean ignorance of pre-Chris- 
tian culture. Humanists these protagonists of pagan 
ideals styled themselves. Humanism breathed a cosmo- 
politan spirit like Catholicism, but unlike this latter it 



20 THE DEVELOPMENT OF ECONOMICS 

stressed worldliness and individual rights. Unlike me- 
dieval learning that of the Renaissance centered on a 
bold appreciation of the immediate environment, of human 
nature in all its phases, of possibilities for material ad- 
vancement and artistic elevation such as men have culti- 
vated ever since. 

Studies from the source now became tests of scholarly 
worth. One need only compare the writings of a Reuchlin 
or Erasmus or Thomas More or Machiavelli with the 
best of medieval books to be impressed with the difference 
of outlook. What an abundance of citations from the 
Ancients ! What a zest for learning regardless of its 
religious implications ! What effervescence of spirit and 
lightness of heart, what daring of conception and faith 
in mankind's earthly destinies ! Verily, men had sloughed 
off the garb of repentance; the joy of life bade them 
search and act, to speak without fear and to urge new 
works whose merit it would be for everybody to put to 
a test. 

Petrarch had opened the new era with his sonnets and 
hymns to the beauty of nature. However near he was 
to Dante in point of time, his temper was of a very 
different age, of times then only in the budding, but 
foreordained to find magnificent expression in the litera- 
ture of the Tudors, in French literature under the 
Bourbons, and in the outbursts of Italian poets and 
essayists from Genoa to Venice. Worldliness in paint- 
ing and architecture, in music and sculpture, in Erasmus' 
"Praise of Folly" where knaves prove honest, in Sir 
Thomas More's "Utopia," and in monuments of scien- 
tific endeavor! A symptom indeed of the times, these 
Utopias of many forms and intents that issued from the 
press between 1500 and 1700! How novel the idea that 
men should concern themselves with their frames of 



NATURALISM 21 

government, with economic conditions, manners and 
customs, with modes of material living and the apportion- 
ment of rights and duties among the members of society ! 
It seemed forsooth as if Alexander Pope had aptly sum- 
marized — in a sort of finale — this motto of the Renais- 
sance, when he wrote: 

"Know thyself, presume not God to scan; 
The proper study of mankind is man." 

(Essay dn Man, 1732.) 

Perfectibility of human nature, as the eighteenth cen- 
tury spoke of it, could be seriously preached and at- 
tempted once it was understood that nothing mattered 
as much as the attainment of happiness and creature com- 
forts by man while still on earth. The distant future 
might then perhaps be supposed to take care of itself. 

Yet it is well known that Humanism was only the 
opening act in the longer drama. For the same rebirth 
that inspired a Melanchthon and Linacre also gave rise 
to the Reformation, to a moral house-cleaning on a vast 
scale, and to economic and intellectual enterprises unique 
in the annals of history. 

The Protestant revolt to be sure had an economic 
background as many a historian has taken pains to 
elucidate. However, there was, on the other hand, a 
purely spiritual opposition to papal dominion, a grow- 
ing feeling that creeds had outlasted their usefulness, 
a determination on the part of earnest-minded thinkers 
to subject to a crucial test the doctrines transmitted to, 
not to say foisted upon, them by earlier generations. 
The Protestant revolution therefore may serve as an 
example of the forces that furthered the cause of social 
science, since together with much conservatism it popu- 
larized the idea of personal worth and effort. At bottom 



22 THE DEVELOPMENT OF ECONOMICS 

the theological creed remained metaphysical and unadapt- 
able to scientific formulae. An astonishing amount of the 
old verbiage, ritual, and dogma was retained as essential 
to human progress. Just as Aristotelianism died slowly 
among Humanists and philosophers, outliving the six- 
teenth century, so Christian dogmatism showed sufficient 
vitality in its Protestant dress to compete with rational- 
ism and science for a place in the minds of men. Religion 
still was synonymous with an orthodoxy unknown to the 
synoptics. Yet, should it be doubted that the advantages 
outweighed the cost? That the return to the Bible as 
the source of religious truth, that the insistence upon 
Justification by Faith as the sole condition to redemption, 
that the nation-wide movements for moral regeneration, 
that all this marked a decided step in advance? The 
Enchiridion of Erasmus not inappropriately was pub- 
lished at the turn of the fifteenth century. From there 
on admonishments came plentifully, the clergy furnishing 
most usually the occasion, but the laity not forgetting its 
own duty in the campaign for betterment. Puritanism 
and the Counter-Reformation among the Catholics, Pres- 
byterian zeal and Quaker simplicity, such are but inci- 
dents in a wave of idealism which helped to balance men 
when epoch-making discoveries unthroned old rules and 
rulers. 

Conservatism and radicalism were strangely mixed in 
reformers like Luther and Melanchthon, in Cusanus and 
Kepler among scientific leaders. A bewildering variety 
of philosophical tendencies is noticeable during this time. 
The old and the new were companions as often as adver- 
saries fighting for dear life. But on the whole the inno- 
vators had the best of it. Pioneers had not battled in 
vain. The sacrifices made by earlier champions of 
liberty and light gradually bore fruit. Much time had 



NATURALISM 23 

passed since Wy cliffs death in 1384, but the interval had 
also given strength to the individualists. Spinoza could 
write in an historical spirit that would have amazed even 
the first translator of the Bible into English. Authority 
after all had been shaken. It was possible now, at the 
beginning of the seventeenth century, to lay down prin- 
ciples, that dealt a death-blow to many medieval canons of 
truth. 

Nowhere did the drift of the Renaissance find more 
unequivocal expression than in the rise of science and 
modern philosophy. Nowhere were the precepts of intel- 
lectual progress proclaimed so fearlessly, so ruthlessly, 
as in the works of scientists who yearned to uncover the 
secrets of nature. Galileo Galilei was the arch-type of 
this new school of thinkers. His cardinal rules that 
science must forever labor independent of authority, and 
that nothing will answer but personal observation and 
experimentation in detail, these rules set a standard never 
yet challenged by his successors. To find out whether 
things were as stated, such was the new attitude. To 
probe into matters, lest authorities were misunderstood 
or themselves deceived; to satisfy the senses wherever 
possible on a subject of science, and to present carefully 
the evidence which was used to support a scientific gen- 
eralization, that was the creed to which all could subscribe 
as long as facts were detached from faith. Nothing 
should stand in the way of this plan for action. No 
opportunity should be lost to enrich human knowledge. 
No mystery was to deter men from inquiring, or to lull 
them into the supposition that God had meant man to 
be ignorant. Nay, nature would be an open book if 
scientific methods moved unimpeded. All experiences 
admitted of investigation. Nothing was so sacred but 
that a quest for truth might justify our utilizing it. 



24 THE DEVELOPMENT OF ECONOMICS 

Hence Vesalius did not hesitate to dissect the human 
body in order to refute Galen. Hence Descartes could 
proudly point to his rabbits as his best books for the 
study of anatomy. Hence the rapid progress made in 
the several sciences, in botany and physiology, in human 
anatomy and in physics, in astronomy and in mathe- 
matics where important discoveries resulted from needs 
for a precise calculus of matter in motion. Instruments 
like the microscope and the telescope aided powerfully 
of course in certain fields, but it was the venture of the 
student rather than his employment of apparatus that 
brought unparalleled successes. It was the spirit of 
the Renaissance, in brief, that gave us a new cosmology 
and a new philosophy whose by-paths ultimately led to 
the systematic study of social events. 

Environmental Changes. — Instincts and ideas may be 
considered the chief social forces, even though the ex- 
ternal environment accounts for much, even though any 
phrase like "social forces" is only a metaphor, which begs 
a question that science has never yet answered. How- 
ever, it is not to be denied that changes other than those 
of creed or philosophy or scientific knowledge helped to 
complete the revolution pictured. Assuredly one may 
mention again the invention of gunpowder and of print- 
ing, and the use of the compass as notable parts of the 
general metamorphosis. Gunpowder helped to destroy 
the medieval political order; printing facilitated the 
education of the masses, besides furnishing experts with 
a means for preserving their latest cogitations ; and the 
compass, when put into the hands of a courageous 
mariner, would reveal continents not suspected by the 
Ancients. In this way certainly a wonderful enlarge- 
ment of the physical world was made possible. Columbus, 
in steering for Cathay, guided human enterprise into 



NATURALISM 25 

channels of trade that made of western Europe a 
world market. The Mediterranean shrunk to an insig- 
nificant inland lake. But the treasures of the Orient 
were therefore not lost, nor had any change of trade- 
routes ever brought such wealth to man. Enormous 
resources exhibited to the explorer's eye! Vast lands 
thrown open to emigrants and colonizing governments. 
A long list of new products for popular consumption. 
Higher levels of living, better housing conditions, more 
currency and a growing investment fund, such were inci- 
dental results of the discoveries. Bio- and agri-culture 
gained by the contact with other nations as well as by 
a type of investigation that before the Renaissance was 
unknown. A better care of animals, breeding and 
domestication of foreign varieties, the introduction of new 
fruits and vegetables, selection and grafting, soil studies 
and farm-management — here were topics that received 
attention largely because of trading opportunities, or 
because manufactures began to take rank with agricul- 
ture as a mainstay of national prosperity. 

Economic organization, correspondingly, underwent 
far-reaching changes. The medieval guild slowly but 
steadily lost its place among craftsmen. Independence 
appealed to artificers and was indirectly fostered by city 
ideals and the centralization of government. Enter- 
preneurs began to separate producers of raw materials 
and the producers of finished goods, while in addition the 
cleavage line between traders and fashioners stood ou-t 
more and more distinctly. Production was still by hand, 
but on a growing scale, and supported here and there by 
machinery that necessitated the forming of joint-stock 
companies. Large cities were thus given a start ; nations 
now could comprise millions of inhabitants, all of them 
subject to one governor, all conscious of one flag and 



26 THE DEVELOPMENT OF ECONOMICS 

future. The fate of nations more than ever came to lie 
in their soldiers. Rivalry of the new kind led to many 
and prolonged international struggles for power. Money 
was needed everywhere. Public finance attracted the at- 
tention of keen thinkers, and statesmen consequently lent 
a willing ear to men who proposed to show how the might 
of the country could be augmented. Was it any wonder 
that economic thought made headway under such propi- 
tious circumstances? 

Mercantilism. — Mercantilism and Kameralism are 
words covering the leading economic ideas of this period 
between 1500 and 1750, whose scope and arrangement 
was an earnest of finer things to follow. Mercantilism 
is best understood as a doctrine to the effect that inter- 
national trade was decisive for the economy of nations, 
and that favorable balances (excess exports of merchan- 
dise), when settled by cash, promoted the political wel- 
fare of nations. Kameralism, on the other hand, refers 
chiefly to the origin and fiscal interests of public economy, 
the expounders of this class being guided by a paternal- 
istic idea such as Prussia exemplified during the 
eighteenth century. Both terms relate to one and the 
same body of teachings; the difference is not of subject- 
matter or of underlying beliefs but of aspects, since the 
one calls attention to theories of wealth and trade, while 
the other alludes to internal policies and to administra- 
tion. But what should be especially noted is the absence 
in all of these works of any attempt at scientific deduc- 
tions from premises of human nature or of social in- 
tercourse. Large libraries were written on money and 
exchange, on balances of foreign trade and on currency, 
on value and price, on interest and rent, on population 
and wages, on the interrelations of farming and labor, 
on the merits or demerits of patents and like monopolies, 



NATURALISM 27 

on consumption, luxury, and waste, on tax sources and 
tax methods; and so on. Not many subjects that were 
overlooked! Not much fault to find with the standard 
treatises if we once grant premises and the limitation of 
data to work with! There was scope and earnestness 
of purpose, diligence and patience in inquiry, though to 
be sure also bias, particularly when questions of public 
policy were involved. 

The German Kameralists studied and taught at the 
same time History, Police, Logic, Jurisprudence, even 
Metaphysics, very much in the style that Adam Smith 
delivered his lectures at Glasgow. A close official and 
sometimes personal relation existed between the scholar 
and the administration. Works were dedicated to 
monarchs. The occasion for writing was often a royal 
wish. Prussian kings founded chairs of Kameralwissen- 
schaft in this spirit beginning with the second quarter 
of the eighteenth century. A religious note also was at 
times much in evidence, especially after the Pietistic 
movement had gained force. Men like Seckendorff, 
Hornigk, and Thomasius relied upon theistic arguments 
for support, while Siissmilch hoped to illustrate the 
beneficence of the deity by demographic statistics. 

Germany was the stronghold of this Kameralistic 
approach, while apparently French and English thought, 
seeking its own higher level, exercised little influence 
upon it. The only economic magazine in Germany about 
the middle of the eighteenth century virtually ignores 
publications across the Channel. Men like Moser and 
Moser who give caste to later German Kameralism seem 
not to be aware of the ideas current in France, which so 
soon were to be transformed into a solid system of so- 
ciological thought. Encyclopedias, commentaries, and 
indices of Economy begin to appear in the market, but 



28 THE DEVELOPMENT OF ECONOMICS 

barring a decided widening of scope the advance is not 
marked. 

As an example of such economic thinking we may men- 
tion Justi's "The Principles of Kameralism," 1756. 
Plere we find indications of great erudition, but nothing to 
suggest the idea of a science dealing with measurable laws 
of human behavior. What is gained in variety is lost in 
definiteness of purpose. The first Book deals with the 
agricultural basis of life and matters of population. The 
second takes up the technique of farming, industry, trade, 
and credit. In the third attention is called to educational 
problems, to religion and ethics ; the evils of luxury and 
unemployment being duly considered. Justice also is 
viewed from a distributive standpoint, though the thought 
uppermost in the mind of the writer seems to be a justifi- 
cation of the existing juridical machinery. Finally, in 
the fourth Book, the argument is concluded with a sum- 
mary treatment of the principles of jurisprudence, the 
underlying theory making political economy an art 
dependent upon state interference for its successful 
working out. Social phenomena are narrowed down to 
questions of administration in the belief that this is the 
central theme of economics. What is needed, we are 
told, is a sound ideal of citizenship, so the sovereign may 
use his powers to the best advantage of the state. Other- 
wise no new principle is introduced into Justi's survey, 
though in scope and objectivity of treatment it ranks 
of course high above those of the seventeenth century. 

Premises of Economics in Psychology. — However, when 
Justi wrote his "Principles" other men in France were 
already laying the foundations for a very different sort 
of economics. Materials had been gradually piling up 
that made this not only possible, but one is tempted to 
say inevitable. So it behooves us, in the first place, to 



NATURALISM 29 

examine some of the notions fundamental to the rise of 
an economic science, and in the second place to bear 
them in mind when following its later development. For 
there must be no uncertainty about the antecedents of 
social science, nor should we forget that it sprung from 
philosophical inquiries in part directly, in part through 
the intermediacy of psychology and ethics. 

Philosophers of the type of Descartes, Hobbes, Locke, 
Hume, the materialists in France, political theorists in 
Germany, and moralists in England, these were the men 
who started economics on its way by closing the gap 
between free will and natural law that had so long antago- 
nized theology and science. It was felt by the end of 
the seventeenth century that law reigned everywhere, and 
that the possibility of systematizing sociological data was 
not as remote as had been believed. An empirical position 
was taken with regard to this problem. The achievements 
of natural science that so startled the world gave a tre- 
mendous impetus to inquiries into the nature and limits 
of knowledge. The rationalists who argued for the 
necessity of a unifying faculty, for a priori judgments 
without which experience would be meaningless, or for an 
absolutist view of reality, of right and wrong, and of 
truth, could nevertheless not deny the strides made by 
investigators who ignored the Absolute. Every new dis- 
covery of science, every step in the elaboration of the 
Newtonian system, every advance in the study of human 
nature fortified the claims of the empiricist. It seemed 
clear to men, particularly in England, that the assump- 
tion of a reality beyond the senses was gratuitous. The 
belief in super-sensual sources of knowledge was gradu- 
ally abandoned by the very men who were most instru- 
mental in founding the science of economics. Empiricism 
held that all the elements of knowledge are post-natally 



30 THE DEVELOPMENT OF ECONOMICS 

acquired, and that, whatever such facts might be worth, 
or whatever their adequacy for the purposes of a meta- 
physician, they made up the sum total of human wisdom. 

For this reason perhaps empiricism contributed most 
to an inductive logic, to the psychology of sensationalism, 
but particularly to an analysis of ethics favoring at first 
individualistic hedonism, and then utilitarianism, i. e., the 
concept of happiness for the greatest number. In 
epistemology this led to phenomenalism, with Hume as 
its chief exponent, and to materialism on French soil. 
In political philosophy it represented constitutionalism 
as against the advocacy of absolutism by the rationalists. 
As exceptions we may mention Hobbes who, though a 
materialist, espoused the cause of the autocratic Stuarts, 
and Spinoza and Kant who had a friendly word for 
popular representation. However, their loyalty to the 
monarchs of the Enlightenment contrasted strongly with 
their discourses on government. 

But for that matter it was of no great importance 
whether continental idealists and transcendentalists 
ruled in either metaphysics or politics, for the origins 
of economics lay in British empiricism and in French 
mechanism; nowhere else. The task of sketching the 
genesis of economics is therefore made comparatively 
easy, because in noting the ascendancy of Saxon em- 
piricism one has virtually explained all. The first 
English philosophers and ethicists borrowed freely from 
Descartes and Gassendi, but the later ones returned 
with compound interest to France this same principal. 
Continental European economics, not excluding the devel- 
opments in Utilitarianism and Marginism, never rid itself 
of the empirical-phenomenalistic heritage. As will be seen 
hereafter, a not contemptible portion of what is charac- 
teristic in present-day economics, had its inception in 



NATURALISM 31 

the views of eighteenth century British empiricists. Their 
psychology provided a basis for ethics, although other 
ingredients went into it also. In their search for a theory 
of knowledge they enlarged gratifyingly the existing 
fund of psychological knowledge, besides laying thereby 
the foundation for a Logic that in J. S. Mill reached its 
most perfect and persuasive form. What was expounded 
in the countless treatises on human nature in those fruit- 
ful years has remained up to this date a groundwork for 
textbooks on price and distribution. 

With the Renaissance of learning there came of course 
also a renewed interest in problems of thought and 
behavior. What the Greeks had said on that subject 
served once more as an inspiration for the speculators 
of the seventeenth and eighteenth centuries. It was 
apparent from the outset that much had been overlooked, 
even though a great deal called for a revamping. 
Descartes here as elsewhere led the van and made note- 
worthy contributions which, however, need not detain us 
because they did not as such influence the founders of 
economics. What continental thinkers brought to light 
on this matter was little compared to what Englishmen 
added themselves. Hobbes, who had visited Paris and 
had met both Descartes and Gassendi, could properly 
attribute his start in materialism to these two scholars. 
As materialist, however, Hobbes did not further the cause 
of economics, and as psychologist he was only a pioneer, 
the central figure in the whole history of empirical psy- 
chology being John Locke. 

Still, this much should be said about Hobbes' views on 
fundamentals of consciousness. He was emphatic in his 
avowal of a materialistic thesis. He reduced psychics to 
physics and put up the equation : Notion is motion ; that 
is, matter and motion suffice to explain all experiences. 



32 THE DEVELOPMENT OF ECONOMICS 

He begins in his exposition with nerve vibration, which 
is held to move the minutest particles of neural and cere- 
bral stuff. Contact with the outer world is made respon- 
sible for this agitation within. Responses result. Sensa- 
tions become consciousness, or are it. And regardless 
of what the complexities of consciousness, they are 
derivable each and all from the first principle announced. 
Thus in his "Leviathan" which represents mature thought 
after earlier essays in psychology, he informs us : "The 
original of them [that is, of our thoughts] all is that 
which we call sense ; for there is no conception in a man's 
mind which hath not at first, totally or by parts, been 
begotten upon the organs of sense. The rest are derived 
from that original." ^ 

"To know the natural cause of sense, is not very neces- 
sary to the business now in hand ; and I have elsewhere 
written of the same at large. Nevertheless, to fill each 
part of my present method I will briefly deliver the same 
in this place." ^ 

"The cause of sense is the external body or object 
which presseth the organ proper to each sense, either 
immediately as in the taste and touch; or mediately as 
in seeing, hearing, and smelling: Which pressure, by the 
mediation of nerves and other strings, and membranes of 
the body, continued inwards to the brain, and heart, 
causeth there a resistance or counter-pressure, or 
endeavor of the heart to deliver itself, which endeavor 
because outward seemeth to be some matter without. 
And this seeming or fancy is that which men call sense; 
and consisteth, as to the eye, in a light, or color figured; 
to the ear, in a sound; to the nostrill, in an odor; to the 
tongue and palat, in a savor ; and to the rest of the body, 

1 Quotations are from the first edition of 1651. See Part I, ch. 1. 
' Ibidem. 



NATURALISM 33 

in heat, cold, hardness, softness, and such other quahties 
as we discern by feeling.'* ^ 

Only four mental states are recognized, viz., sensation, 
imagination, memory, and desire, the second and third 
figuring as "decaying sense." And then we are told that 
of the two possible kinds of trains of thought sprung from 
single ideas the "second is more constant; as being 
regulated by some desire and design. For the impression 
made by such things as we desire, or fear, is strong and 
permanent, or (if it cease for a time) of quick return." 
. . . "From desire ariseth the thought of some means 
we have seen produce the like of that which we aim 
at; and from the thought of that, the thought of means 
to that mean; and so continually till we come to some 
beginning within our own power." ^ 

Hence two general facts arise that economists up to 
J. S. Mill have considered seriously in discussing motives 
and methodology, namely, in the first place truth consists 
in an agreement of ideas among each other, not of ideas 
with things outside as others maintained, and in the 
second place, desire rests on sensations or a memory 
thereof, the net result being a moral judgment standard- 
ized by society. 

Hobbes said : "When a man reasoneth he does nothing 
but conceive a sum total, from additions of parcels ; or 
conceive a remainder, from subtraction of one sum from 
another; which (if it be done by words) is conceiving 
of the consequence of the names of all the parts to 
the name of the whole ; or from the names of the 
whole and one part, to the name of the other part." ^ 
And a propos of this it is further remarked: "Cause is 
the sum or aggregate of all such accidents, both in the 

* Ibidem. 

* Ch. 3. 
" Ch. 5. 



34 THE DEVELOPMENT OF ECONOMICS 

agent and in the patient, as concur to the production of 
the effect propounded, all which existing together it 
cannot be understood but that the effect existeth with 
them; or that it can possibly exist if any of them be 
absent," ^ . . . a way of looking at the problem of 
causation that does not differ greatly from J. S. Mill's 
in his Logic written nearly two centuries later. 

As to desire, this is simply a kind of motion "within 
the body of man," which is commonly called endeavor; 
and ^'this endeavor, when it is toward something which 
causes it, is called appetite or desire; . . . and when the 
endeavor is fromward something, it is generally called 
aversion." '^ "But whatsoever is the object of any man's 
appetite or desire, that is it which he for his part calleth 
good: And the object of his hate and aversion, evil; and 
of his contempt, vile and inconsiderable. For these words 
of Good, Evil, and Contemptible are ever used with rela- 
tion to the person that useth them: There being nothing 
simply and absolutely so ; nor any common rule of Good 
and Evil to be taken from the nature of the objects them- 
selves ; but from the person of the man, ... or from an 
arbitrator or judge, whom men disagreeing shall by con- 
sent set up, and make his sentence the rule thereof." ^ 
In other words, concepts of good and bad are acquired 
like other knowledge, being usually purposive, and vari- 
able for time and place. 

There is much in Hobbes' view that Locke, who belongs 
to the next generation, shared with him; but the differ- 
ences are no less striking. Hobbes ranked high as 
systematizer, but evinced little originality. He repeated 
himself in order to drive home his main doctrines, and 

8 Hobbes, The. Elements of Philosophy, 1655, W. Molesworth edition, 
1839, Part I, ch. 6. See also Part II, ch. 9. 
"^ Leviathan, Part I, ch. 6. 
* Ibidem. 



NATURALISM 35 

moreover repelled readers by his lumbering style both in 
Latin and in his native tongue. Locke was equally prac- 
tical at bottom, as his public career proves to satisfaction, 
but on the whole was more thorough and versatile. 
Though depending much less upon continental models of 
thought, he succeeded in making himself clear to a large 
circle of readers. He greatly improved the psychology 
of his older compatriot. His influence was enormous and 
affected the political events of two continents. He took 
his time in meditating over abstruse questions. He 
waited twenty years before giving his "Essay Concerning 
Human Understanding" to the world (in 1689). His 
main aim is to reveal the roots and limits of knowledge, 
not to clarify ideas on passions and ethics. He does 
away with the argument for innate ideas, and in the 
fourth book of his Essay enters cautiously upon his 
central topic. 

In general he adheres to sensationalism, but adds 
that reflections, being "the perception of the operations 
of our own minds within us as it is employed about the 
ideas it has got, which operations, ... do furnish 
the understanding with another set of ideas which could 
not be had from things without" ^ must be distinguished 
from sensations directly traceable to outside stimuli. 
All ideas are thus derived from sense or from reflection. 
Simple ideas become complex "by combining several 
simple ideas into one compound," ^^ or through like 
processes. Through association ideas are built into more 
or less regularly recurring and compact groups of 
thought, and through wrong associations many errors 
arise, as for instance superstitions and fallacies in argu- 
mentation. 

» Locke, J. Essay Concerning the Human Understanding, 1689, Book 
II, ch. 1, § 4. 

i» Ibidem, ch. 12, § 1. 



36 THE DEVELOPMENT OF ECONOMICS 

But what is here more to the point, Locke not only 
repeats Hobbes' view that truth consists of an agree- 
ment between ideas merely — thus adopting phenomenal- 
ism ^^ — but furthermore proclaims the certainty of moral 
truths derived indirectly from reflections. For: "Complex 
ideas, except those of substances, being archtypes of the 
mind's own making, not intended to be the copy of any- 
thing, . . . cannot want any conformity necessary to 
real knowledge." ^^ "And hence it follows that moral 
knowledge is as capable of real certainty as mathe- 
matics." ^^ Indeed, "truth properly belongs only to 
propositions," -^^ either as in logic, the demonstrative sci- 
ence, or as in mathematics and ethics, the intuitive kind 
of knowledge, all the rest being empirical and no more 
than probable knowledge such as is gathered by nat- 
ural science. 

Now, in this conception of the laws of thinking and 
feeling Locke was followed quite closely by David 
Hume, although there confronts us again a change of 
classifications and of terms. .For instance, Hume dis- 
tinguished between impressions and ideas, his "Treatise 
of Human Nature," written when he was scarcely twenty- 
five years old, commencing with this thought upon which 
so much was made to rest. "All our sensations, passions, 
and emotions," he says, are impressions, while "the faint 
images of these in thinking and reasoning" constitute the 
idea. Every simple idea springs from an impression, 
while complex ideas, developed from them in the style 
described by Locke, may originate also from other ideas, 
instead of from impressions. Besides, impressions "may 
be divided into two kinds, those of sensation and those of 

" Ibidem, Book IV, ch. 4 § 5. 
" Ibidem. 
" Ibidem. 
^* Ibidem. 



NATURALISM 37 

reflexion," the latter being "derived in a great measure 
from our ideas, and that in the following order: An 
impression first strikes upon the senses and makes us 
perceive heat or cold, thirst or hunger, pleasure or pain 
of some kind or other. Of this impression there is a 
copy taken by the mind, which remains after the impres- 
sion ceases ; and this we call an idea. This idea of 
pleasure or pain, when it returns upon the soul, produces 
the new impressions of reflexion, because derived from it. 
These again are copied by the memory and imagination 
and become ideas ; which perhaps in their turn give rise 
to other impressions and ideas. So that impressions of 
reflexion are only antecedent to their correspondent ideas ; 
but posterior to those of sensation, and derived from 
them." 1^ 

Locke's argument on laws of association as the key 
to chains of reasoning is, conformably to this view, 
accepted almost in its entirety. Hume, in order to round 
out his phenomenalistic sweep, has merely to add that 
this principle, conjoined with that of "a like association 
of impressions," opens the way also for a science of 
morals, in that the interactions for all cases are of like 
nature. "There is but one kind of necessity, as there is 
but one kind of cause, and the common distinction 
betwixt moral and physical necessity is without any 
foundation in nature." ^^ Natural and social sciences 
move, in this sense, on one level. Causation becomes a 
purely conceptual thing, and mathematics similarly 
merely a demonstration from premises arbitrarily 
posited. For the rest, there are probabilities, but not 
certainties. All knowledge is illusory, however definite 
our feeling about the environment that the senses bring 

^^ Hume, D. Treatise of Human Nature, 1739. Edition by Selby-Bigge 
of 1888 ; Book I, Part I, § 2. 

"Ibidem, Book I, Part III, § 14. 



38 THE DEVELOPMENT OF ECONOMICS 

us in touch with. Metaphysics could not explain what 
experience left doubtful as a matter of logic. 

Premises of Economics in Ethics. — Herein then lay also 
the reason for the ethical, as contrasted with the 
epistemological, skepticism of the empiricists. It was 
not surprising that a matter-of-fact attitude should 
resolve moral values into routine appraisals of a prac- 
tical-minded man, thus forcing economics in the end to 
an admission either that economics is ethics, or that ethics 
is not part and parcel of science at all, but rather a mode 
of speculation that must be kept quite distinct from 
purely descriptive analysis. 

Furthermore, ethics before the nineteenth century 
lacked the support that an accurate knowledge of 
biology and social processes might have given. It was 
still the age of introspection and deductions from theo- 
rems pertaining primarily to the problem of reasoning. 
If Christian influences therefore did not predetermine 
ethical precepts, or metaphysical idealism forestall a 
pragmatic version, a common sense standpoint was most 
natural. Men consulted their own innermost thoughts 
and arrived thence at certain conclusions. The period 
of the Enlightenment was prone to look at itself by way 
of self-criticism. Memoirs and autobiographies penned 
with brutal frankness, classification in utmost detail that 
extended even to the realm of art, notably of painting, 
sightseeing tours to learn of other people's manners from 
a discriminating angle, such were diversions fashionable 
at a time when leisure was still respected and a pension 
or sinecure the normal goal of many a distinguished 
intellect. The relative place of nature, man, and mind 
was the subject of profound musings. A reconciliation of 
opposites seemed imperative, and with the aid of pagan 
thinkers the task was bravely begun. 



NATURALISM 39 

It would of course be too much to say that the Greeks 
furnished the age of Enlightenment with the ideas back 
of the "Wealth of Nations'^ or the gospel of hedonism. 
Such direct and unqualified approval was quite out of 
the question, partly because modern science and psychol- 
ogy provided enough new material of their own, and 
partly because Christian ideals after all exerted a power- 
ful influence upon minds of every shade of philosophical 
opinion, upon empiricists and phenomenalists no less than 
upon the rationalists of the type of Leibniz and Kant. 
However, there remains the fact that the Renaissance 
revived Greek ethics as well as Greek metaphysics and 
art, and that the reprints in the original, with copious 
commentaries, of the Greek treatises gained vogue among 
thinkers who, indirectly, were the fathers of economics. 

The ethics of Plato and Aristotle was less influential, 
so far as the development of economics is concerned, than 
the doctrine of their successors. It was the product of 
Greek skepticism that the eighteenth century could best 
appreciate — the philosophy of disappointment and of 
negation that the political and intellectual history of 
Greece so naturally led up to, even if it was not the 
primary cause of it. What Epicurus and Zeno had 
preached was more easily understandable (at least in its 
original form) than what more systematic thinkers like 
Plato or Aristotle expounded in terms far removed from 
the commonplaces. 

The two main schools of Greek ethics that dominated 
ancient thought up to the fall of the Roman empire both 
had something to give to a modern age in which 
mech9,nism and teleological notions, deep religious fervor 
and cold rationalistic temper existed side by side, not 
only in the minds of humble folk, but particularly in the 
world of research and meditation. 



40 THE DEVELOPMENT OF ECONOMICS 

Both Epicureanism and Stoicism sprang from mate- 
rialism. Both might have claimed Protagoras and 
Democritus as their intellectual godfathers. In both 
schools knowledge was traced to the senses, and happiness 
sought as the chief aim in life. So that, to begin with, 
they united in rejecting the ideal of absolute truth, of 
perfect virtue, of goodness based on knowledge, or reali- 
ties transcending the results of perception. However, 
here the resemblance stopped, for the Epicureans made 
happiness a self-sufficient reward of their endeavors, 
while the Stoic doctrine sought happiness chiefly as a 
by-product of uncompromising virtue. What is more, 
according to Epicurus pleasure itself was good, and pain 
bad, and though the elevation of mind was by no means 
scorned, the main trend was toward creature comforts. 
It was pleasure of the self that Epicureanism aimed at, 
pleasures varying in quantity merely, the duration of 
pleasure counting more than its intensity at the moment. 
To achieve happiness in this sense, therefore, wants had 
to be multiplied. The normal thing to do was to cater 
to wants, to add to their variety, and to take care that 
the human will was employed to this end. In spite of a 
materialistic undercurrent, consequently, the volitional 
aspect of life received much attention. What happened 
here on earth counted most of all. An essentially non- 
religious attitude was assiduously cultivated, the general 
result of which was a struggle said to go on between man 
and nature, since man had to labor in certain ways to 
gain contentment. 

The Stoics, quite to the contrary, extolled the advan- 
tages of an ascetic spirit. They agreed that happiness 
was the desideratum, but in making it an incident to 
unalloyed virtue they turned their back on the quantita- 
tive interpretation of values. It was the quality of pain 



NATURALISM 41 

and pleasure that mattered decidedly. Peace would 
fall to those solely who learned how to renounce, how 
to abstain and explain away the necessity of things. 
The fewer wants, the nobler the victory, so we are told. 
In a mood of resignation, thus. Stoicism passed over to 
a kind of fatalistic belief. For all their preachments of 
a God and of a Purpose, they bowed to Fate. And with 
this attempt at an all-embracing outlook there came the 
union of reason and morality. To the Stoic, God was in 
nature ; pantheism seemed alone satisfactory. And again, 
nature betokened reason, while virtue in turn was ob^ 
tainable only through a conscientious application of 
reason. Hence God, reason, nature, and law became all 
one. What ruled in the universe was a mighty single 
principle. The emanations of the human mind at their 
best could not but reflect the greater spirit ruling with- 
out. Man and nature were one. To understand our- 
selves we needed the outside world to instruct us. It 
was evident that nothing was gained by pitting feeble 
man against irresistible forces about him. 

Contrasting the two viewpoints in this manner one 
cannot guess at once which of the two would satisfy best 
the needs of a social science. It is not by weighing the 
relative merits of the two that we find their place in mod- 
ern thought, but by remembering that Christianism 
reigned everywhere in Europe, while, as regards the prac- 
tical side of a theory of conduct, much could be said in 
favor of one of the doctrines, and little for the other. 
So it came about — one is inclined to add logically — that 
the Stoics colored political philosophy, while the Epi- 
cureans found friends mainly among out and out econo- 
mists. At any rate, what the seventeenth and eighteenth 
centuries said on government and international law heark- 
ened back to ancient Greek and Roman Stoicism; but 



42 THE DEVELOPMENT OF ECONOMICS 

what impressed the sensationalists in England was for 
the most part the hedonism of Epicurus. Monotheism 
among the clergy and many of the Transcendentalists 
was not to be sullied by the implications of the Stoics, 
implications that were of oriental design anyhow, and 
ran directly counter to the Nicaean Creed. So it seems 
reasonable that continental thinkers like Descartes, 
Geulincx, Malebranche, Arnauld, Pascal, Bossuet, 
Spinoza, Leibniz, Thomasius, Wolff, and finally Kant 
grounded their ethical systems on Plato, Aristotle, or 
the Bible alone. Adam Smith himself, though hostile to 
sheer utilitarianism, disapproved at the same time also 
of Stoicism. 

Yet the Physiocrats incorporated Stoic teachings in 
their economics by way of political philosophy, uniting 
nature and man, while Epicureanism came to power in 
the second stage of economic growth, when Smith's sys- 
tem was transformed into Utilitarianism. As will be- 
come apparent later on, this switching from stoically to 
hedonistically tinged economics was one of the chief 
changes occurring between 1776 and 1836 when Senior 
published his article on economics in the Metropolitana. 

The beginnings, however, lie again in Hobbes, just 
as in matters of psychology and logic. For Hobbes was 
the first British writer to profit by the revival of Greek 
sensationalism in France during the first half of the 
seventeenth century. 

Incidentally speaking, Hobbes, of course, applied his 
philosophy to practical questions of politics. It was 
natural for him to trace a relation between materialism 
and hedonism on one side, and between both and a theory 
of absolute government on the other side. He was con- 
vinced that men were alike in fundamentals, and needed a 
strong arbiter to keep them orderly. He believed in the 



NATURALISM 43 

genuineness of a compact between people and ruler, and 
saw no promise of a millennium so long as human beings 
were fundamentally selfish. In his own words ("Leviathan, 
or the Matter, Form, and Power of a Commonwealth 
Ecclesiastical and Civil," 1651), "Nature hath made men 
so equal in the faculties of body and mind" that, though 
some differences exist, "the difference ... is not so con- 
siderable as that one man can thereupon claim to himself 
any benefit to which another may not pretend as well as 
he." -^^ So, "from this equality ariseth equality of hope 
in the attaining of our ends ; and therefore if any two 
men desire the same thing, which nevertheless they cannot 
both enjoy, they become enemies." ^^ The result is a 
war of all against all; for it is "a general rule of reason 
that every man ought to endeavor peace, as far as he 
has hope of attaining it; and when he cannot obtain it, 
that he may seek and use all helps and advantages of 
war." ^^ 

It was this sort of an appraisal that made Hobbes an 
outspoken opportunist in matters moral. He assures us : 
"No man giveth but with intention of good to himself; 
because gift is voluntary; and of all voluntary acts the 
object is to every man his own good; of which, if men 
see they shall be frustrated, there will be no beginning 
of benevolence or trust, nor consequently of mutual 
help . . . " ; 20 and so on. Indeed, it is characteristic, 
and deserves mention even at this point in our investiga- 
tion of economic history, that Hobbes attributed com- 
merce entirely to motives of mutual benefit, and this from 
a standpoint close to the Marginal ! Thus he writes : 
"The value of all things contracted for is measured by 

" Hobbes, Leviathan, ch. 13. 

" Ibidem. 

" Ibidem, ch.l4. 

20 Ibidem, cb. 15. 



44 THE DEVELOPMENT OF ECONOMICS 

the appetite of the contractors ; and therefore the just 
value is that wliich they be contented to give." ^^ And 
again it is in keeping with this prosaic view of human 
nature that he informs us: "Moral philosophy is noth- 
ing else but the science of what is good and evil in the 
conversation and society of mankind. Good and evil are 
names that signify our appetites and aversions ; which 
in different tempers, customs, and doctrines of men are 
different." ^^ Even the Stoic law of nature is reduced 
to a hedonistic terminology, for we read that, while "the 
true doctrine of the laws of nature is the true moral 
philosophy," ^^ a "law of nature is a precept or general 
rule found out by reason, by which a man is forbidden 
to do that which is destructive of his life, or taketh away 
the means of preserving the same; and to omit that by 
which he thinketh it may be best preserved." ^* So all 
judgments are relative both as between nations or indi- 
viduals, and as between one situation in which any one 
of us may find himself, and a second situation. Values 
are always pragmatic. Nothing sums up more concisely 
Hobbes' view of ethics than his remark: "There is no 
such . . . Summum Bonum as is spoken of in the works 
of the old moral philosophers," ^^ a sentiment shared, 
as was the bulk of his moral outlook, by John Gay when 
he wrote: "Obligation is the necessity of doing or omit- 
ting any action in order to be happy." ^^ 

Now, Locke was a good bit of a hedonist in the 
eighteenth century sense of the word, but like most of 
the empiricists following Hobbes he refused to accept a 
coldbloodedly individualistic standpoint. He tells us in 

21 Ibidem. 

" Ibidem. See also ch. 6. 

23 Ibidem. 

2* Ibidem. 

25 Ibidem, ch. 11. 

26 Gay, J. Preliminary Dissertation : Concerning tbe Fundamental 
Principles of Virtue and Morality. 



NATURALISM 46 

his Journal that no doubt man lives mainly to obtain 
"the happiness this world is capable of, which is nothing 
but plenty of all sorts of those things which can, with 
most ease, pleasure, and variety, preserve him longest 
in it"; but his whole theory of sensationalism leads 
toward a social interpretation of pleasure. Ideas of ap- 
proval figure prominently in Locke's experiences. What 
we think of people, and how we react to their disapproval, 
constitutes necessarily a part of the associations that 
are built into creeds and proofs. Precisely in this sense 
"delight or uneasiness," he remarks, "join themselves to 
almost all our ideas of both sensation and reflection ; and 
there is scarce any aff*ection of our senses from without, 
and retired thought of our mind within, which is not able 
to produce in us pleasure or pain." ^^ 

The connection, thus, between Locke's view of knowl- 
edge and his view of ethics can hardly be misunderstood. 
The one logically leads to the other. It is as Locke 
writes in a significant paragraph: "Amongst the simple 
ideas which we receive both from sensation and reflection, 
pain and pleasure are two very considerable ones. For 
as in the body there is sensation barely in itself, or ac- 
companied with pain and pleasure, so the thought or 
perception of the mind is simply so, or else accompanied 
also with pleasure or pain, delight or trouble, call it how 
you please." ^^ Ethics is "the seeking out those rules 
and measures of human actions which lead to happiness, 
and the means to practice them" ; ^^ but "things are good 
and evil only in reference to pleasure and pain," ^^ so 
that ideas, memories, and associations are of primary 
importance. 

" Locke, Essay Concerning Human Understanding, Book II, ch. 7, § 2. 
2» Ibidem, Book II, vch. 20, § 1. 
29 Ibidem, Book IV, ch. 21. 

^» Ibidem, Book II, ch. 20, § 2. For Locke's definition of pleasure, 
pain, and happiness see ch. 20, § 15, and ch. 21, § 42. 



46 THE DEVELOPMENT OF ECONOMICS 

The social, or the universalistic phase, as it has by 
some been called, of ethical empiricism was taken up again 
by Hume in his inquiries into the problem of knowledge; 
and this time the irrationality of morals becomes evi- 
dent enough. It is not altogether a matter of ideas or 
impressions, we are assured. The intellectualistic theory 
of feelings will not in itself suffice to explain the whole 
situation. Even though stimuli and feeling, painful re- 
membrances and moral judgments are closely related, fur- 
ther items deserve mention. On the one hand, Hume in- 
forms us, "it is easy to observe that the passions, both 
direct and indirect, are founded on pain and pleasure, and 
that in order to produce an affection of any kind, 'tis only 
requisite to present some good or evil. Upon the re- 
moval of pain and pleasure there immediately follows a 
removal of love and hatred, pride and humility, desire 
and aversion, and of most of our reflective or secondary 
impressions." ^^ But on the other hand feelings spring 
from a variety of sources, not all of which affect our 
fellowmen equally. "For we reap a pleasure from the 
view of a character which is naturally fitted to be useful 
first to others, or secondly to the person himself, or 
which is agreeable first to others, or secondly to the per- 
son himself."^2 \Yhat is more, "the mind by an orig- 
inal instinct tends to unite itself with the good, and to 
avoid the evil, though they be conceived merely in idea, 
and be considered as to exist in any future period of 
time." 23 Qj. ^Q p^^ 'I- differently: "Moral sentiments 
may arise either from the mere species or appearance 
of characters and passions, or from reflections in their 
tendency to the happiness of mankind, and of particular 
persons." ^^ 

" Hume, Treatise, Book II, Part III, § 9. 
'2 Ibidem, Book III, Part III, § 1. 
" Ibidem, Book II, Part III, § 9. 
'* Ibidem, Book III, Part III, § 1. 



NATURALISM 47 

As will be seen from Chart One the development of 
British utilitarianism, as ethics^ can be indicated only by 
reference to many writers, there being a natural line of 
division between empiricists proper and intuitionists who 
believed in an innate sense of right and wrong; but be- 
yond that distinctions involve considerable attention to 
details. Whether a theistic concept or a resort to 
conscience or a sociological view preponderates in any 
particular work it is sometimes impossible to tell. We 
feel only, as in the case of Hume, that sensationalistic 
psychology is not consistently, or not exclusively, em- 
ployed as a key to morals. Virtue according to Hume, 
for instance, might not be natural — so that both in- 
tuitionists and Stoics are wrong — but neither do sense 
experiences meet every question. Indeed, in combating 
Mandeville, the author of the "Fable of the Bees, or 
Private Vices, Public Benefits," 1714, who sermonized 
on the merits of elegant leisure procured at the expense 
of the common man's toil — in warning against this fal- 
lacy Hume was impelled to make much of a spectator 
within us, somewhat in the manner ordinarily associated 
with Adam Smith. 

Various British moralists endeavored thus to give 
hedonism a social value, Cumberland, Tucker, and Paley 
relying upon reason, just as Locke had done, while Hume, 
Smith, and Ferguson pointed to benevolence or sympathy, 
that is to the sentimental side of human nature. 

To illustrate with a few instances apart from what 
has been said about Hume. 

Cumberland in 1672 wrote: "The greatest benevo- 
lence of every rational agent toward all the rest con- 
stitutes the happiest state of each and all of the benevo- 
lent, so far as it is in their own power; and it is neces- 
sarily requisite to the happiest state which they can 



Chart One — Genealogy of British Utilitarianism 

Psychology Greek Metaphysics^ Bit)le 



Christian Theology 



Individualistic 
Hedonism 
(Hobbes) 



Pleasure as 
Quantity only 
(Gay. Hartley, 
Tucker, Paley) 



(Bentham\ 
Jas. Miii; 




Intuitionism 



Rational Basis of 
Moral Judgmeht 



Qualities of 
Pleasure (Cum- 
berland, Locke, 
Berkeley) 



Qualities of 

Conduct 

(Hume, Smith, 

Ferguson) 




Emotional Basis 
of Moral Conduct 

(Shaftesbury, 
Hutcheson, Brown) 



Rational Basis 
of Moral Judg- 
ments (Cudworth, 
Clark, Butler) 



J. S. Mill 



48 



NATURALISM 49 

attain; and therefore the common good is the supreme 
law." ^^ From the Third Earl of Shaftesbury whose 
"Characteristics" were as original as they proved influ- 
ential, this: "If by the natural constitution of any ra- 
tional creature the same irregularities of appetite which 
make him ill to others make him ill also to himself, and 
if the same regularity of affections which causes him to 
be good in one sense, cause him to be good also in the 
other, then is that goodness by which he is thus useful 
to others a real good and advantage to himself. And 
thus virtue and interest may be found at last to agree." ^^ 
And from Hutcheson, the immediate predecessor of 
Smith in the theory of ethics : "the origin of moral ideas 
is the moral sense of excellence in every appearance or 
evidence of benevolence." ^'^ The creator of the world 
"has given us a Moral Sense to direct our actions and 
to give us still nobler pleasures, so that while we are 
only intending the good of others we undesignedly pro- 
mote our own greatest private good." ^^ 

To give these disquisitions on moral sense and acquired 
moral sentiments their proper value it should be remem- 
bered that Smith as the founder of Naturalistic economics 
in England followed the ethics of Hume and Hutcheson, 
adding, to be sure, his ozem theory of sympathy. In its 
beginnings British economics thus was non-hedonistic. 
But under Ricardianism a decided change takes place. 
From there on the hedonistic-utilitarian concept domi- 
nates economists both on the continent and across the 
Channel, so that Sensationalism necessarily forms a part 
of our historical survey, 

"Cumberland, R., quoted by De Laguna, Th., in his Introduction to 
the Science of Ethics, 1916, p. 193. 

38 Edition of 1699, vol, 2, Inquiry Concerning Virtue and Merit. 

" Inquiry into the Original of Our Ideas of Beauty and Virtue, 1720, 
vol. 2, p. vii. 

" Ibidem. 



50 THE DEVELOPMENT OF ECONOMICS 

But a propos of this optimistic view of human nature 
entertained by the Moral Sense philosophers, was it any 
wonder that economics started with free-trade doctrines? 
Let us ponder on the following from Ferguson, the author 
of "Institutes of Moral Philosophy," 1767: "The ef- 
fect to mankind should be the same, whether the indi- 
vidual means to preserve himself, or to preserve his com- 
munity." ^^ "The interests of society . . . and of its 
members are easily reconciled," *^ since "love and com- 
passion are, next to the desire of elevation, the most 
powerful motives in the human breast." *^ Wasn't this 
what some Physiocrats believed, and what especially Vol- 
taire, in his unbounded admiration for Saxon genius, 
echoed in the words : "It is self-regard that also pro- 
motes the interests of others. Thanks to our mutual 
needs we help one another; and this is the basis of all 
trade, of all social solidarity" ? ^^ The identity of per- 
sonal and national interests seemed thus proven to men 
who had no particular economic issue to meet. 

Naturalism. — The originators of this notion as well as 
of the Moral Sense were the Stoics whose naturalistic 
philosophy permeated a great part of seventeenth and 
eighteenth century literature. Naturalism was the se- 
quel to dogmatism of the ecclesiastical sort. With the 
wane of faith in a transcendent God, mysteriously func- 
tioning in a trinity, it was not difficult for thinkers to 
bring God to earth through nature herself. It was 
shown that nature is not sinful but wholesome, that man 
could not be fundamentally bad since God had made him 
as He had created heaven and earth, and that the con- 

39 Ferguson, A. Institutes of Moral Philosophy, edition of 1767, Part 

' *o Ferguson, A. Essay on a History of Civil Society, Part I, ch. 9. 
" Ibidem, Part I, ch. 6. , ^, . ^,. x, 

« Quoted by Lifthardt, D. Chr. E., in his Geschichte der Christlichen 
Ethik, 1893, p. 464. 



NATURALISM 51 

Crete things of daily experience were as fit to reveal God 
as the sublimest miracles of the Church. In short, the 
pre-Christian view of God and universe was revived. 
Platonic idealism was dropped as unnecessary to our un- 
derstanding of religion. What was unintelligible in 
dogma was largely discarded, and what science had said 
about a new cosmology did service as proof for Imma- 
nence. God was everyvrhere. The cosmos itself incor- 
porated a divine plan, a product of reason whose replica 
was the human mind. 

From this standpoint then the mechanistic presenta- 
tion of the world was plausible. One could easily lose 
sight of a process of means and ends such as orthodox 
Christianity preached. One could depict life as in a sta- 
tionary, finished state, minimizing the difference between 
hell and heaven. What evidently accorded most with the 
achievements of modern science was the depersonalization 
of God, i.e., the identification of God with nature in all 
its details, and the fusion of reason with virtue. 

Guided by the Stoics the modern philosophers thus 
drifted toward a naturalistic, static conception of human 
institutions. A state of nature was preached in which 
peace reigned (though exceptional writers like Hobbes 
imagined just the opposite), and the creatures of the 
earth lived in perfect adaptation to their environment. 
Beast and man alike could not but conduct themselves 
otherwise than was conducive toward their welfare. In- 
stinct was but the affective side of reason, actions giving 
effect to what the former two had urged. Man was social 
by predisposition, and in the long run behaved so as to 
enhance the fortunes of his comrades, no matter what 
moved him in his projects. As long as reason presided 
men had nothing to fear from their own kind. What 
had gradually, and periodically, brought about a state 



52 THE DEVELOPMENT OF ECONOMICS 

of misery among men was their own falsification of na- 
ture's dictates. Institutions were subject to errors, and 
these would have to be corrected if progress was to be 
permanent ; but things would right themselves naturally 
also, since God had meant human beings to be worthy 
of His designs. 

A variety of principles were deduced from this main 
proposition, such as the possession by man of certain 
inalienable rights of a political sort, his title to self- 
government within liberal bounds, his erection of gov- 
ernments on prearranged terms, a contract being drawn 
up to define the mutual rights and duties of governor and 
subject. XrCgislatures had powers to regulate many 
things, but in all cases the human law, whether military 
or moral or economic, was but a reflex of an underlying 
larger rule laid down by God. Or if it was not, misfor- 
tunes were impending; for what was unnatural was 
thereby immoral, and what was immoral was certain to 
perish in time. 

There were men of course who ridiculed the idea of a 
government by contract ; men like Hume, Blackstone, and 
later on Bentham. The sensationalistic-utilitarian psy- 
chology did not need a social order established through 
the artifice of a compact. And there were also prophets 
who turned Naturalism to strange uses in education and 
etiquette, Rousseau being the most celebrated instance 
of this other cry of a "return to nature." One need not 
wonder at such applications of a mighty concept, if one 
remembers the circumstances of the time, the decadence 
of morals and manners, the approach to bankruptcy of 
kings and courtiers, and the dissatisfaction prevailing 
among thoughtful men and women in various walks of 
life. But at the core Naturalism was an abstraction cal- 
culated to systematize a litter of facts and fancies per- 



NATURALISM 53 

taining to moral philosophy. The burden of Naturalism 
was the desire to describe human relations so as to make 
life rational and virtue practicable. An imposing array 
of arguments was gradually brought together to con- 
vince readers. In several fields men labored to find a 
substitute for a crumbling creed. Richard Hooker, 
whose great work on the "Laws of Ecclesiastical Polity" 
appeared in 1594, Althusius and Grotius, Locke and 
Montesquieu and Rousseau, Pufendorf, Burlemaquai and 
Vattel — they each and all expounded Naturalism. Chris- 
tianity by the Deists was proven to be as rational as self- 
protection. Revelation now turned out to be no more 
than an axiomatic truth. The Scriptures were vindi- 
cated in new style, and doubters shown to be arrant knaves 
or doddering fools. It is symptomatic of the vogue of 
Naturalism, and of the grip it had on professional minds, 
that as staunch a utilitarian as W. Paley should write 
(even in 1785) : "Moral philosophy, morality, ethics, 
casuistry, natural law mean all the same thing, namely 
that science which teaches men their duty and the rea- 
sons of it." ^^ 

The best use of Naturalism was, however, made, not 
in ethics, but in politics where popular interest was so 
much more lively. It was here that the times were espe- 
cially ripe for a close-knit web of theories, and it was 
here that empiricism once more carried off the palm of 
victory, securing public approval when idealistic men 
like Spinoza or Kant could hardly make themselves heard. 

Political philosophy gained in the eyes of the people 
chiefly because great issues were being fought between 
ruler and the ruled. 

Since the Renaissance powerful nations had come into 

« Paley, W. Principles of Moral and Political Philosophy, first edi- 
tion, Book I, ch. 1. 



54 THE DEVELOPMENT OF ECONOMICS 

being. Millions of inhabitants swore allegiance to one 
flag. Hundreds of thousands of square miles of land 
had come under the scepter of this or that dynasty. The 
long struggle against the papacy had compelled Protes- 
tants to find defense for their impious deed. Secular 
power had to be declared independent of the clerical, and 
if convenient even exalted at the expense of the citizen. 
A divine-right theory of kings was thus forged by degrees 
out of pieces furnished by the New Testament and the 
Church itself during the Middle Ages. Monarchs every- 
where had exercised despotic powers, and on the Euro- 
pean continent clung to them for many generations. 

Yet a reaction against this exaltation of the Crown 
set in among certain religious sects. Calvinism and In- 
dependentism meant self-determination in more senses 
than one. Recalcitrant kings who would not espouse the 
cause of great religious reformers were anathematized 
and — metaphorically speaking — deposed. In France the 
Huguenots, in England the Puritans and minor sects, in 
the Netherlands nationalists raised the banner against 
absolute dominion, ^axes furnished a welcome bone of 
contention. Personal government was decried and re- 
sponsibility to the people deemed imperative. First the 
revolution of the Netherlands in 1579, which was ex- 
pressly justified by reference to a social compact; then 
the constitutional battle in England, the final episode 
being the writing of the Bill of Rights in 1689 and the 
Act of Settlement a few years later ; then the revolt of 
the American colonies under cover of the Rights of Man ; 
and last not least the French Revolution which gave the 
coup de grace to so many European survivals of the 
Dark Ages ! 

It is not hard to see that Naturalism could give an 
air of irrefutable logic to such events, to the demands 



NATURALISM 55 

actuating pamphleteers, political leaders, or idols of the 
mob. The thought that nature had made all men equal, 
and endowed them with the inviolable right of pursuing 
happiness, this slogan had force when motives were not 
lacking. The dictum of Rachel in his "Law of Nature 
and Nations," 1676, that "since man is constituted by 
nature a social animal, and it is his peculiar task to live 
according to reason so that in civil life he may find con- 
stant occupation in well-doing. Divine Providence has 
prescribed rules of life which are the best suited to his ra- 
tional and social nature, and these are the very rules of 
nature . . . ," ** this viewpoint paved the way for 
Locke's "Essay on Government" of 1690, in which con- 
stitutionalism won its finest victory. From then on the 
future of popular sovereignty was assured. 

Furthermore, by means of this specialization social sci- 
ence itself benefited appreciably, for ere long the dif- 
ference between jurisprudence and kameralistic studies 
became apparent. If the stoic philosophy was used to 
sanctify paternalism, it also gave a mighty impetus to 
international law, to "the law of nations," as it was at 
first baptized. Ethics eventually was separated from 
jurisprudence, and both from economics. A subdivision 
of inquiries went on during the eighteenth century that 
helped to determine the form of Smith's "Wealth of Na- 
tions." 

Statistics and Historiography. — But finally, something 
had likewise been contributed by statisticians and his- 
torians. Much valuable material in the earlier litera- 
ture of economics had been garnered by these investi- 
gators who, while faithful workers in quest of truth, were 

** Rachel, S. On the Law of Nature and Nations, 1676, edition of 
Carnegie Institution of Washington, D. C, 1916, vol. 2, p. 8. 



56 THE DEVELOPMENT OF ECONOMICS 

certainly not familiar with the reasoning of psycholo- 
gists or of Physiocrats. 

In its first stages statistics, to be sure, meant no more 
than a collection of facts relating to politics. Data were 
compiled to reveal the military or economic powers of a 
state, comparative studies taking the name of Cos- 
mography. The growth of nations and the mercantilis- 
tic policy of statesmen lent interest to such investiga- 
tions. Resources were catalogued and brought to the 
reader^s attention so as to appeal to his patriotism. 
Physical and commercial geography came in for their 
share of consideration, though not infrequently accuracy 
was sacrificed for the sake of impressiveness. In Eng- 
land Harrison's "Description of England," 1577, is a 
fair type of what statistics include at that time, and 
what in the compiler's opinion the people wanted. On 
the continent the "Respublicse Elzeviranse" of Leyden by 
Holland publishers (1626—) were widely known and 
used, some sixty states being comprised in the collection. 
The German Kameralists wrote bulky tomes on "Staatsbe- 
schreibung," that of Conring, 1660, being especially well 
received. Thomasius, the chief exponent of German Ra- 
tionalism in those days, not only was the first to dare use 
his mother tongue in lectures at the University of Leip- 
zig, but also introduced in 1694 Statistics as one of his 
regular courses. Still later Achinwall (1749) published 
his "Outlines of the New Political Science," in which the 
description of political facts was subordinated to an his- 
torical treatment ; while in England Salmon's "Present 
State of All Nations" had long circulated as a work of 
distinct merit. 

Demographic records, too, became plentiful about this 
time. The oldest official data, namely church registers of 
birth, death, and marriage, were preserved with a grow- 



NATURALISM 5T 

ing appreciation of their value for future generations, 
and clerks put in charge soon after the Reformation. 
Vital statistics in general were first compiled in Spain 
at the end of that century, though no systematic in- 
quiries appear to have been made until much later. It 
was the age of the Enlightenment that set a good ex- 
ample here as in other things, and gave to statistics at 
once a standing among other fields of investigation. In 
Prussia the first census dates from 1719. Nearly a hun- 
dred years later the bureau was reorganized and put on a 
permanent basis — possibly another one of those efforts 
made at that time to infuse life into a nearly defunct 
state, whose very existence depended on the goodwill of 
Napoleon. In France the beginnings were equally hum- 
ble and devoid of immediate results, but by 1820 this 
branch of the public service had been definitely recognized 
as important for many governmental needs. 

Apart from official undertakings, however, those of a 
private origin must be considered, and these take us back 
far into the seventeenth century. England once more 
seems to have led the way. It was there that Graunt, 
1662, published his "Natural and Political Observations 
Upon Bills of Mortality." It was there that Halley, the 
discoverer of the comet named for him, gave out his 
figures on death-rates and population in 1693. King's 
and Petty's tables gained recognition at once and served 
as an incentive for similar studies by German economists. 
In 1698 we hear of a life-insurance company founded for 
the purposes of protecting individuals against risks 
through death. Population was watched increasingly as 
an index of prosperity and national power, the pessimis- 
tic attitude of Malthusian days being as yet unknown; 
for there was enough to eat, and manufacture still played 
a minor role in national life. Indeed, on theological 



58 THE DEVELOPMENT OF ECONOMICS 

grounds the movements of population were regarded as 
a sign of divine intentions, as for instance in the 
"Betrachtungen liber die GottHche Ordnung in den 
Veranderungen des MenschUchen Geschlechts" (1767) by 
J. P. Suessmilch. In other words, statistics had not so 
far been treated as an exact science, following principles 
of logic and mathematics, but rather as a field for in- 
formation that might prove suggestive to monarchs and 
tax collectors. The state almanacs appearing from 
1700 on answer this purpose, as well as periodicals and 
textbooks for collegiate use, which by the middle of the 
century had reached quite a finished form. 

Still, it may be argued that precision was aimed at 
more and more, and that mathematicians by their 
treatises on probability did give a fillip to statistical in- 
terests. For while mathematics was not indispensable 
to a thorough cultivation of the field, it could not fail to 
economize labors or to corroborate inferences from par- 
ticulars near at hand. Assuming a given number of 
variables, laws of recurrence could be stated quantita- 
tively, per block of events, per class, or per unit of time. 
And it deserves noting that mainly on this account sta- 
tistical investigations strengthened a belief in social laws 
which govern human events, just as physical events were 
already known to obey laws. Thus the calculus of New- 
ton and Leibniz bore indirectly upon the rise of social 
science. Thus Pascal's and Fermat^s books on proba- 
bility in games of chance, published in 1660, stimulated 
statistical inquiry. Thus Bernouilli's "Ars Conjec- 
tandi" of 1713, and the later publications of Euler, were 
in keeping with tendencies of the time. 

Historians, on their part, kept abreast of events by 
widening their field, by subordinating chronology to syn- 
thetic accounts of the past, by searching for a unifying 



NATURALISM 59 

principle back of human records. The Renaissance fur- 
nished the raw materials for the new science; the seven- 
teenth and eighteenth centuries turned out finished prod- 
ucts that, in some cases, were worthy to be ranked with 
the best of our own age. 

However, it was the rationalistic temper of these 
histories rather than their contents that must impress 
us ; and it was the idea of a philosophy of history 
that most of all prompted men to study the socio- 
economic aspects of human evolution. Pioneers like Bos- 
suet, Vico,*^ and Montesquieu for this reason exerted an 
influence upon the founders of economics. Adam Smith 
had good precedents when he devoted a large portion of 
his "Wealth of Nations" to a resume of former economic 
systems ! To sum up long periods of time under a single 
viewpoint was no longer a novelty in his day. In France 
Turgot had published his "Successive Advances of Human 
Nature," 1750; Voltaire several comprehensive histories 
including his "Essay on Morals and Customs," 1756 ; and 
Condillac his "Universal History" in 1775. Among Eng- 
lish works deserve notice Ferguson's "Essay on the His- 
tory of Civil Society," 1767, and preeminently, of course. 
Gibbon's "Decline and Fall of the Roman Empire," the 
first volume of which appeared in 1776. Germany also 
could point to meritorious works, for instance to Iselin's 
"Philosophical Speculations on a History of Mankind," 
1764; to Schlozer's "General Scandinavian History," 
1772, which at the time enjoyed great popularity; to 
Wegelin's "Memoirs on a Philosophy of History," 1776, 
and to the essays of Moser, Lessing, and Herder who 
combined literary excellence with loftiness of thought. 

Genealogy of Social Science. — Without going further 

*^ See his Principes de la Philosophie de I'Histoire, translated from the 
Italian by Michelet, J., 1835. Vico frankly admits his indebtedness to 
Hugo Grotius, the Dutch jurist. 



Chart Two — Genealogy of Social Science 



Greek Thought 

Psychology Mathematics Metaphysics 



rthics^ 



Bible 



Anno 





•— ° 1 

C 

a. 


\% \ 1 / V^Christlan 
1^ \ \ 1 \ Theology 




1500 




\\/ V 








W Modern Science \ 






Chemistry ^^-"^^"""^ — ^ \ 

Mathematics ^^ 1. \Anatomy "~~"'^-— -,. — ) 
V Physics \ -> 

Astro'nomy >^Kj^chology / 


r 


1650 




___,.^-.^'-|^ Ethics \ / 





Political ^^ 
Philosophy 



1750 



Economics 



^\*^Physiocratism 

y*: ^vStatisjtics 
Smithianism \ 



Historiography 



1850 


^^Utilitarianism 


A 


Sociology 


1900 


^Marginism 


Historism 






^^'"'^ 




New Economics ? 



60 



NATURALISM 61 

into this side of the genesis of economics, one cannot help 
being struck with the abundance of materials that had 
by 1770 been laid up, ready for anybody that should wish 
to convert economics into a science. A long period of 
preparation was at last to bear fruit. As the accompany- 
ing chart will show at a glance, the ultimate sources of 
economics are to be sought in Greek philosophy; but, 
more precisely taken, the antecedents lie in the two cen- 
turies following the Renaissance. Christian theology 
proved of no import, though it did influence modern 
ethics. On the other hand modem science, especially 
through the researches that culminated in the Newtonian 
system, was the direct occasion for men's asking whether 
physics and psychics might not be linked by a common 
principle in law and logic. With the aid of these data 
psychology opened up new vistas, and ere long provided 
a basis for a theory of knowledge as well as for a theory 
of ethics. Together these lines of investigation forced 
upon able thinkers the conclusion that the study of the 
social environment was worth while, that master prin- 
ciples might be unearthed, that rules might be prescribed 
for the furtherance of public well-being, and for the moral 
elevation of individuals. Description and prescription 
were not as yet rigidly sundered, though the possibility 
suggested itself. What was evident, however, was the 
growing desire to compete with physicists and mathema- 
ticians. Both in France and in England men arose who 
attacked this problem, thereby launching a new science, 
to be known as economics. 



CHAPTER THREE 
NATURALISM (Continued) 

n. Physio cuATisM 

Underlying Ideas. — The Physiocrats, or Economists 
as they called themselves with a certain pride in their 
work, may justly be considered the founders of economics 
because they were the first to study social processes from 
the standpoint of law and causation, exactly as Newton, 
for example, had done in another field. They applied to 
the body politic what English empiricists had originally 
tried to discover in individual human nature, namely a 
principle of regularity in the occurrence of events, ac- 
cording to which they might be connected and perhaps 
predicted just as astronomers had explained the varied 
phenomena of the heavens. It was shown that wealth 
circulated and satisfied several requirements essential to 
national welfare, the inference being at the same time 
that something definite might be done to promote this 
tendency toward growth and progress. Not that all mem- 
bers of the Physiocratic group held the same opinion in 
details, but rather that they shared like views on funda- 
mentals, and thus furnished a basis for literary and social 
activity that was the more effective since the needs of the 
times favored it. 

For France under Louis XV had gradually lost 
its prestige in Europe. The strength of the country 
had been sapped in bloody and rather useless wars and 

62 



NATURALISM 63 

Pyrrhean victories, which pleased no one. Profligacy at 
court had more than offset the frugality of the peasant. 
Pomp and ceremony could not compensate for the grow- 
ing deficits of the exchequer. The popularity of Louis 
XIV gave way to a bare tolerance for his great-grandson, 
and this to a hearty contempt for the prince who came 
to the throne in 1774. From then on the government was 
at the mercy of financiers who were expected to remedy 
overnight the evils that had been engendered by a century 
of improvidence and autocracy. 

Thus one might say that what the ministers of the 
king vainly endeavored to accomplish by near-at-hand 
measures, such as loans and a curtailment of feudal privi- 
leges, the Physiocrats meant to do with their study of 
production and circulation. To them the problem was 
definite, and a solution possible by mathematical demon- 
stration. They relied upon their philosophy to show the 
natural order underlying what on the surface was so 
chaotic. They sought to vindicate the prior rights of 
landlord and farmer who, by virtue of their strategic 
position, could make or mar the country in conjunction 
with the Crown. In the long run, their Economic Table 
purported to show, public finance must vary with private 
cost-keeping and spending. From nature alone all sur- 
plus came, but treasuries would be empty as long as 
there was misappropriation at the source. 

In what may be called the premises of Physiocratism 
there is no more merit than in most of the eighteenth 
century Naturalism. We find the Stoical viewpoint de- 
veloped in theories of a state of nature, laws of nature, 
and natural rights. What Hooker and Grotius, Locke 
and Pufendorf, Vattel and Montesquieu had said in their 
treatises on sovereignty or on international law, the 
Physiocrats repeated with little or no variation. The 



64i THE DEVELOPMENT OF ECONOMICS 

static rationalistic outlook which had so distinctly in- 
spired English moralism, besides coloring psychological 
nomenclature, also predominated in France. Nay, French 
philosophy was so much beholden to the pathfinders across 
the Channel that, in perusing its pages, one feels brought 
back to the Restoration period of British speculation. 

It seemed quite sufficient for the Physiocrats to say: 
"The natural order is merely the physical constitution 
which God Himself has given the universe." '^ Or : "Natu- 
ral law is the right a man has to things for the enjoy- 
ment thereof .'' ^ And for this reason, "to secure the great- 
est amount of pleasure with the least possible outlay 
should be the aim of all economic eifort." ^ Mainly in 
succeeding in this policy the natural order would 
be realized among men. Nature meant prevision and 
precision. God had willed it so. There was no need 
of devising means for saving an individual or a nation, 
provided only nature was correctly understood, and being 
understood, followed implicitly in the management of 
one's affairs. 

Tlie laws regulating the movements of the planets or 
the interactions of matter, were active in the organic 
world also, and especially in human society where com- 
plexity so obscured the fundamentals. Nature was all- 
wise and beneficent. Its reign extended over everything. 
What God had planned in the creation of the universe 
was not to be supposed to shut out mankind. Rather, if 
man made laws it was only by way of reflecting the higher 
and more general reason in things, the legislator, in this 
sense, modeling his positive order on the eternal natural 
which pervaded the cosmos. Considered from one point, 

1 See Dupont de Nemours' Physiocratie, 1767-68, Introduction to 
Quesnay's Works. 

2 Collection des Principaux Economistes, by Daire, Eugene, 1846, 
vol. 1 ; Quesnay, Le Droit Naturel, p. 46. 

3 Ibidem, Quesnay's Dialogues., 



NATURALISM 65 

therefore, Naturalism meant the acknowledgment of con- 
tinuity from physics to psychics. It was denied that 
two different sets of law ruled environment and society. 
It was taken as almost self-evident that the apparent 
gulf is simply an illusion due to man's unbalanced mind 
or faulty vision. If men would think and probe into the 
inner meaning of life they would soon admit their impo- 
tence in matters of morals or government. What could 
they think of that had not from the beginning been known 
and assigned its place? What were acts of parliament 
if not natural law applied, or in other words inferior 
copies of a wisdom older than man? 

Hence, viewed from another angle, there need be no 
fear of misfortune so long as the natural economy was 
left undisturbed. For God was benevolent and fatherly 
in His solicitude. Things would right themselves even if 
for a while they went badly. Human nature was meant 
to gain by the physical arrangement, not to suffer 
unnoticed. The very inequality among men with re- 
spect to their innate aptitudes, capacities, tastes, and 
passions was a means for endless progress. Division of 
rights and duties rested on this important fact. The 
convenience, nay necessity of private property, was thus 
logically assured. Individuality of men could not be lost 
without defying the same principles that differentiated 
life below man. It was rational that a variety of interests 
should exist, and that Reason itself should guide men in 
their everyday economic cares. For how could they win 
out except by continual adaptation of their faculties to 
the precepts ordained by God? And how could there be 
adaptation without poise and diligence, i. e., reason? 
Happiness was morality suited to nature. It was pro- 
curing the utmost pleasure through right use of energy 
iind intelligence. In such observance of natural dif- 



66 THE DEVELOPMENT OF ECONOMICS 

ferences, wrought everywhere into an orderly system by 
Providence, lay the promise of justice to all. Interests, 
no matter how divergent, were reconciled by divine fore- 
thought, which man could scarcely overlook if anxious 
to prosper. Or in the words of Mercier de la Riviere: 
"The movements of society are spontaneous and not arti- 
ficial, and the desire for joy which manifests itself in all 
its activities unwittingly drives it toward the realization 
of the ideal type of state.'' All was well if nature held 
sway. Optimism was the right note, not apprehension 
over ills that man had foolishly brought upon himself. 

Two characteristics, consequently, play their part in 
Physiocratism, viz., first, a belief in distinctions between 
men, lest order in society become anarchy ; and secondly, 
an easy faith in the goodness of men which reflected God's 
own goodwill and needed but a sufficient amount of free- 
dom to bring bounteous returns. Order was the quintes- 
sence of reason. Man was a rational creature and could 
not forget his supreme responsibilities without sinking 
into barbarism. Inborn differences had always existed 
and probably would not disappear. There had to be 
governors and governed, landlords and farm-hands. 
Private property was by divine sanction no less than by 
the reason of things which the whole nature of man and 
the records of history attested to. Rights were real, but 
they differed and served several ends, not all of them 
obvious perhaps to the untutored. 

Yet, as against this acceptance of the Ancient Regime, 
the Physiocrats cherished, in addition, ideals strikingly at 
variance with it. So much so indeed, that one is tempted 
to class them with the philosophers that forecast the 
Revolution. For in expatiating complacently on the 
natural order of things, one conformable to reason and the 
real designs of the Creator, the Physiocrats unavoidably 



NATURALISM 67 

drew a contrast between France as it was and as it might 
be. Moreover, they were impelled to deprecate govern- 
mental interference, or for certain purposes to condemn 
it altogether. If men had the qualifications to measure 
nicely their own interests, if Providence stood sentinel so 
dangers might be eschewed, if physical laws extended to 
social happenings no less than to the motions of matter, 
then manifestly it was absurd to hem in men's enterprise at 
all points. To hinder might be bad, but to help even 
worse. Or, as the elder Mirabeau delivered himself : Leg- 
islation, if conformable to nature, was unnecessary, and 
if in violation of it, certain of defeat, for in the long run 
nature was the strongest. Mistakes could be made, but 
they must not become policies parading as virtue. To let 
alone was a good maxim for statesmen lest their zeal 
take them too far. Natural instincts could be trusted 
to do much good. 

However, there were other grounds on which Physioc- 
ratism looked askance at paternal methods, and in ad- 
vancing them philosophy was abandoned for economics 
in the narrower sense. 

Forerunners had of course been developing the various 
views which proved exceedingly valuable without turning 
economics into a science. What the Mercantilists and 
Kameralists had stored up as the elements of an art of 
political economy, the French school utilized in part 
under the influence of English writers. But what entitles 
the Physiocrats, as remarked before, to the credit of hav- 
ing founded the science of economics is their unambigu- 
ous reference of economic particulars to a world order 
in which law is everything, in which matter and mind 
obey a principle of motion or circulation, in which by 
Design above man his activities come to express measur- 



68 THE DEVELOPMENT OF ECONOMICS 

able relations, ratios as in production, or rates as in the 
course of progress. 

From this standpoint it was natural for the Physio- 
crats to emphasize the collectivistic norm rather than the 
individualistic, even though they preached Laissez Faire 
and sincerely approved of the social stratification of 
their day. They ended with the individual because they 
believed in God, but they began with inert matter and 
the weal of nations because they saw Him through na- 
ture. The cult of nature was the reaction of modern 
times against medieval theocracy. The study of sub- 
stance and space was an attempt at reconstructing an 
older personalism. A stress upon the material aspect of 
life was wholesome when poverty was dreaded and En- 
lightenment adored. 

Economic Doctrines. — So the Physiocrats were con- 
sistent in defining wealth as concrete things derived, in 
one way or another, from the earth. They meant stuff 
when they said value. They pointed to articles more 
than to the services back of them. They saw the fecun- 
dity of the soil, or of the species inhabiting it, and found 
nothing in trade or industry to equal it. The wealth of 
nations was its soil and subsoil, its mines and forests, its 
fisheries and water-power. These assets might be used 
to provide a steady income. A surplus sprung from the 
clever exploitation of nature, not from the handicraft of 
the city-dweller. Extractive industries paid well; the 
rest was a change of forms of no decisive significance for 
the realm. Each season nature could leave a net product 
measurable on the scales, but by a like test the labors of 
merchant and manufacturer proved futile. It was a 
question, ultimately, of knowing to what uses rawstuffs 
should be put. If a certain ratio of these to finished 
articles, or of necessities to luxuries, or of agricultural 



NATURALISM 69 

improvements to personal services, met with public ap- 
proval, justified by the welfare of the nation and the 
needs of the Crown, then well and good. Otherwise there 
was no use boasting about industry and trade balances, 
especially if the sources gave out, or riches were em- 
ployed recklessly for the amusement of some, and to 
the undoing of others. What would production boot if it 
neglected the prior rights of the farmer? Was anything 
"produced" if no quantitative increase could be ascer- 
tained? Was wealth more than stuff from the social 
viewpoint, or at least could any occupation compare with 
the agricultural, supposing the primary needs of a nation 
were at issue? In a crisis production had to aim at ma- 
terials first of all. The conversion of produce or other 
yields of the earth into commodities was desirable, but 
merely auxiliary to the general end which was surely 
the prosperity of the whole kingdom. 

In this temper the Physiocrats proposed definitions and 
classifications of toilers that could not last in a competi- 
tive age. Cost keeping took on a peculiar aspect, for it 
was almost socialistic, the books being kept, as it were, 
for the nation as a whole, with the result that distribution 
became an impersonal affair between three or four groups 
of the population, not at all traceable by the pricing 
process which obtained as widely almost in eighteenth 
century France as in Ricardian England. 

Budgeting was involved in the attempt at describing 
the cycle of wealth which annually repeated itself in har- 
mony with other rotations such as for instance that of 
the blood in the human body or the orbits of the planets. 
It was seen that agriculture necessitated several kinds 
of funds, one to buy stock and implements, a second to 
improve the grounds, a third to supply seed and like 
materials seasonally renewable, and perhaps a fourth to 



70 THE DEVELOPMENT OF ECONOMICS 

take care of expansion of business. In estimating these 
amounts and tracing their returns to society the rela- 
tive position of industrialists or servitors on the one 
side, and of tillers or proprietors on the other, chal- 
lenged attention. The cycle of expense and product, of 
investment and surplus could be pictured as occurring 
in space, as covering the different parts of the country 
in which consumers lived. Or it could be understood as 
an act of apportionment among claimants to the stock. 
Or it could be followed as a continual transformation of 
materials through human intervention, many ends and 
classes of people thus being satisfied. 

And this is exactly what was done. Cost was not a 
part of price, but an outlay by the only real producer 
— the farmer. Consumption was not of values, but of 
stuffs taken from the soil. Capital was not a right, but 
a store of materials fashioned variously so as to aid 
rural development. Other uses, while practical enough, 
must be made ancillary to this one of singular importance. 
Waste was folly when, and because usually, a charge 
against agricultural efficiency. Individual price and in- 
come could not matter a great deal since the problem was 
the strengthening of the people as a whole. The masses 
had a subsistence wage. Little more was assumed to be 
necessary. But how many farms there were, how man- 
aged, and what form finally the raw materials took, that 
deserved careful consideration. If we except Turgot or 
the glosses of the Physiocrats proper, we shall be im- 
pressed with the neglect of questions that later eco- 
nomics pronounced to be of central significance. 

Significant to the Physiocrats were, however, certain 
applications, such as the reform of taxes, the restriction 
of feudal rights, and the inauguration of greater freedom 
in industry and trade. 



NATURALISM 71 

The latter, as stated above, was advocated partly owing 
to a serene reliance upon Providence and the social dis- 
position of man, and partly because of the distinction 
made between farming and other economic pursuits. For 
if trade and industry were sterile there was no point to 
protecting them artificially. On the contrary, it might 
be advisable to repress such activities so as to preserve a 
right balance between stuff and service production. And 
by the same token free-trade within national boundaries 
would be salutary since, for one thing, it would enhance 
the mobility of the agricultural surplus, and for another 
would relieve people of taxes which after all could be 
borne by only one economic class. The need of the times, 
as the Physiocrats saw it, was greater soil-production, 
less luxury and waste, and a more equitable, because more 
scientific, system of taxation. Taxes could be levied 
from none except those whom nature blessed with a 
natural surplus. What the soil produced over and above 
the requirements of the farmer, that was a genuine bonus 
for landlord, industrialist, trader, and professional. Let 
the taxes fall on this original surplus. Let there be 
stoppage at the source, if administratively feasible. If 
collected from the non-producers it will mean leakage 
and probably favoritism for undeserving classes. It was 
for the landlord to decide how much the land needed in 
replacement and investment sums, but after that any 
charge made upon him would have a beneficial restraining 
influence on the mode of living of others. The non- 
producers would feel the check the more, the severer the 
standards of the governments in its undertakings. 

Physiocratism, in short, had solidaristic leanings by 
the force of its premises and reasonings, if not from an 
intent to rectify social errors. Driven to its logical con- 
clusion it might go far toward a subversion of the old 



72 THE DEVELOPMENT OF ECONOMICS 

political order, and this is the interpretation put upon 
it by some contemporaries, the Revolution being only a 
decade or two away. The Physiocrats not only espoused 
Enlightenment in certain applications of their own view, 
but they were in accord with liberalism as an antidote 
for mercantile fallacies. They stood in line with the 
rising forces that proclaimed Non-interference as a first 
maxim of statesmanship. 

III. Smithianism 

Uiiderlying Ideas. — Adam Smith was not a successor 
of Quesnay, but he learned something from him, and 
besides went farther in his analysis of the economic 
process. The broader interests of Physiocratism were 
not disavowed. But Smith after all represents a different 
viewpoint in important respects, as can easily be seen 
from his life history or his two principal works in which 
most of his professional opinions have been laid down 
with admirable lucidity. 

In Physiocratism morality is a detail that in no wise 
affects its fundamental propositions. The mechanistic 
outlook determines the course of reasoning in spite of 
much verbiage about a beneficent Providence. Stoicism 
and not Christianism furnished the main weapons of de- 
fense. The world order was conceived more nearly as a 
play of forces due to matter in motion, than as an organic 
growth in which a Supreme Will presided. In France 
both materialism and mechanism gained a firmer foothold 
than on British soil. The French leaders of the eight- 
eenth century were more consistent than their models in 
England. Metaphysics from the start had meant more 
to the former than to the latter, and in the analysis of 
economic processes the human aspect was unconsciously 



NATURALISM 73 

slighted, from a desire to be precise. Exact economics 
was in vogue among the Physiocrats long before it was 
revived as an ideal by the Utilitarians and Marginists. 
Hence, in scanning the pages of that School, one is 
oppressed by a sense of dryness, of sheer scholastic erudi- 
tion that contrasts poorly with the picturesque, invigor- 
ating exposition of the great Scotchman. Much food for 
thought, one is prone to lament, but only for those who 
are famishing for it ! 

Now, this was not the style of Adam Smith; nor was 
he given to a hobby of speaking in the abstract. To him 
the individual was a unit and center both, the sole object 
of fruitful study, and the bearer of all that might tend 
toward progress. Just as labor with him became more 
decisive than land, just as morality to him was a power- 
ful agent for directing social enterprise, so he aimed con- 
stantly at illustrating his theorems from commonplaces in 
which the purely human figured at least as prominently 
as discussions of public policy. The pragmatic note was 
less often sounded than by his French colleagues, yet on 
the whole it made a more lasting impression. The author 
of a "Theory of the Moral Sentiments" was not likely to 
be misunderstood by an interested audience. Or, if he 
had dealt less summarily with the systems of earlier ages, 
there was the title itself of his economic treatise: "An 
Inquiry into the Nature and Causes of the Wealth of 
Nations," — evidently a request that people think dis- 
passionately of the welfare of all, without losing sight 
of the individual's share in the drama. 

Smith had mused long over the ethical values of life 
before concentrating upon those matters which to-day 
pass as the whole of economics. It would be an exaggera- 
tion to say that his "Wealth of Nations" is a mere by- 
product of his larger interests, but there is no doubt 



74 THE DEVELOPMENT OF ECONOMICS 

that it came as an afterthought, rather late in his career, 
a monument to research conducted when his fame as a 
philosopher was already assured. For, as we know from 
his duties at the University of Glasgow, where he began 
teaching in 1751, he lectured on the whole field of Moral 
Philosophy — Natural Theology, Ethics, Justice, and Po- 
lice coming under that term. Such was the practice on 
the continent, such had been the precedent established 
by his own teacher, Francis Hutcheson, whose doctrines 
influenced him profoundly. As an adherent of Deism it 
could not have been difficult for him to combine theology 
with jurisprudence, but it is suggestive of the thorough- 
ness of his thinking that he felt constrained to separate 
Politics from Ethics. For in the former, if we may 
believe his first biographer, Dugald Stewart, he meant 
to comprise only such "regulations which are founded, 
not upon the principle of justice, but that of expediency, 
and which are calculated to increase the riches, the power, 
and the prosperity of a State." ^ 

That is to say, not only was a line of demarcation 
drawn between the realm of right and duty on the one 
side, and that of utility or positive law on the other, but 
furthermore he assigned to the principles of political 
economy a preeminent role in the development of man- 
kind. Economics to him was a crucial point in the turn- 
ing of history, not simply a phase dear to the heart of 
Farmers-General. Consequently, premises had to be 
found in facts of no immediate bearing upon his problem. 

Smith's psychology, to be sure, does not occupy a 
dominant position in either his "Theory of the Moral 
Sentiments," which appeared in 1759, or in the "Wealth 
of Nations" of which the first edition came from the 
press seventeen years later. We must judge mainly from 

* Stewart, D. Works, edit, of 1829, vol. 7, p. 10. 



NATURALISM 7^ 

Smith's preliminary studies in England and abroad, from 
his close friendship with, e.g., Hume, the author of the 
"Treatise of Human Nature" (to say nothing of the 
several "Inquiries," his "Essays," and his "History of 
England"), and from his casual statements on the sub- 
ject a propos of his ethics. But generally speaking his 
psychology was that of John Locke and Hume. We 
hear him hint at sensation as the source of ideas, at 
association of ideas, and the dual nature of man who 
struggles between a predisposition to suit only himself, 
and a recurrent regard for the weal of his fellowmen. As 
to the problem of knowledge he no doubt sided with the 
empiricists, and furthermore agreed to the tri-partite 
division of the mind into the faculties of will, affection, 
and cognition as it was current at that time. But he 
stood somewhat apart in making more of the emotions 
than even Hume, and in placing a sense of duty, acquired 
in the natural course of social progress, above the selfish 
weighing of pleasure and pain. For all his appreciation 
of economic values he refused to think of men as con- 
sumers only. There was a law of compensation that 
punished the evil-doers and rewarded the friends of 
righteousness. Equality in some respects was decreed 
by God! 

Indeed, his Naturalism carried him far afield. In the 
"Wealth of Nations," for instance, he informs us that "by 
nature a philosopher is not in genius and disposition half 
so different from a street-porter, as a mastiff is from a 
greyhound. . . ." "The difference between the most dis- 
similar characters . . . seems to arise not so much 
from nature as from habit, custom, and education." ^ 
This of course squares with the views of Hume and 

" Wealth of Nations, Book I, ch. 2. Edition used Here is that of 
Everyman's Library, publ. by Dutton, E. P., and Company, New York. 



76 THE DEVELOPMENT OF ECONOMICS 

with a growing sentiment among political philosophers, 
and goes to show why Smith expected much from personal 
initiative. His optimism was grounded in this amiable 
view of life which Naturalism, as already pointed out, 
had everywhere fostered. Thus he exclaims : "Without 
any intervention of the law, therefore, the private in- 
terests and passions of men naturally lead them to divide 
and distribute the stock of every society among all the 
different employments carried on in it, as nearly as pos- 
sible in the proportion which is most agreeable to the 
interests of the whole society." The main passages in 
his "Wealth of Nations" reflecting this attitude are too 
well known to need repetition here. But it deserves men- 
tion that much the same idea was expressed in the 
"Theory of the Moral Sentiments," where nothing of a 
scheme of political economy is as yet intimated. He says 
for instance: "Take the whole earth at an average: For 
one man Avho suffers pain or misery, you will find twenty 
in prosperity and joy, or at least in tolerable circum- 
stances." ^ And again : "They [the opulent] consume 
little more than the poor, and in spite of their natural 
selfishness and rapacity, though they mean only their 
own conveniency, though the sole end which they propose 
from the labors of all the thousands whom they employ, 
be the gratification of their own vain and insatiable desires, 
they divide with the poor the produce of all their improve- 
ments. They are led by an invisible hand to make nearly 
the same distribution of the necessaries of life, which 
would have been made, had the earth been divided into 
equal portions among all its inhabitants ; and thus, with- 
out intending it, without knowing, advance the interest of 
the society, and afford means to the multiplication of the 
species. When Providence divided the earth among a few 

«Part III, ch. 3. 



NATURALISM 77 

lordly masters, it neither forgot nor abandoned those who 
seemed to have been left out in the partition. ... In ease of 
body and peace of mind all the different ranks of life are 
nearly upon a level." "^ Did Roscher, the pioneer of the 
Historical movement a century later, think of this passage 
when he added: "As, in the structure of the world, the 
apparently opposing tendencies of the centrifugal and 
centripetal forces produce the harmony of the spheres, 
so, in the social life of man, self-interest and conscience 
produce in him the feeling for the common good" ? ^ Prob- 
ably not, but it is certain that many have echoed these 
sentiments of a noble investigator who, in spite of his 
knowledge of the world, could not believe in the failings of 
men. Laws of nature, rights of men, and the rationality 
of virtue appeared to direct people so that good prevailed 
over evil. 

The theological background in fact gave the setting to 
most of Smith's psychological arguments. He thought 
of man as being made in the image of God more than as a 
machine that, in French materialistic fashion, operated 
like atoms in endless space. He vents his feelingG about 
the matter in phrases like: "God, the avenger of injus- 
tice." ^ Reverence for natural behavior "is still further 
enhanced by an opinion, which is first impressed by nature, 
and afterwards confirmed by reasoning and philosophy, 
that the important rules of morality are the commands 
and laws of the Deity who will finally reward the obedi- 
ent, and punish the transgressors of their duty. . . ." ^^ 

'Part IV, ch. 1. 

8 Principles of Political Economy, translated by Lalor, J. J., 1878, 
vol. 1, p. 75. See also Smith's Wealth of Nations, Book IV, ch. 2 and 
ch. 7. 

» Theory of the Moral Sentiments, Part III, ch. 5, Edition used is 
the last published during Smith's lifetime, reprinted by Wells & Lilly, 
Boston, 1817. „ ^ 

^"Ibidem. A strikingly similar view will be found in Vico s (J. B.) 
Principes de la Philosophie de I'Histoire, 1725, Book I, ch. 4. See 
Michelet's (J.) translation from the Italian, 1835. 



78 THE DEVELOPMENT OF ECONOMICS 

God meant men to be happy ; "no other end seems worthy 
of that supreme wisdom and divine benignity which we 
necessarily ascribe to Him." ^^ We are benevolent our- 
selves because convinced that "all the inhabitants of the 
universe, the meanest as well as the greatest, are under 
the immediate care of that great benevolent and all-wise 
Being who directs all the movements of nature, and who 
is determined, by his own unalterable perfections, to main- 
tain in it, at all times, the greatest possible quantity of 
happiness." -^^ Hence the virtuous will be content that 
national interests "should be sacrificed to the greater 
interest of the universe — of which God Himself is the 
immediate administrator and director." ^^ And here again 
we find assent among writers of a different temperament, 
as in W. Whewell, the author of the "History of Inductive 
Sciences," who in his "Elements of Morality" exclaims: 
"These ideas [of benevolence, justice, etc.] were given to 
man by God in order that he might, by them, direct his 
actions." ^* Or note from the Archbishop Whately this 
belief : "Man is, in the same act, doing one thing by choice 
for his own benefit, and another undesignedly under the 
guidance of Providence for the service of the commu- 
nity." ^^ Reason thus was the mirror by which men 
should adjust their dress of manners. 

All this then reminds us that Smith not only listened 
to the prophets of his day, but that, on a test, he could 
answer questions independently. For he frankly admitted 
his dissent where it counted, and rejected even more than 
he assimilated. He was an eclectic like other founders 
who add enough in treatment and viewpoint to dominate 
their age, and yet have their mind attuned to the voices 

" Ibidem. 

"Ibidem, Part VI, ch. 2. 

" Ibidem. 

" Whewell, W., vol. 1, Book III, ch. 1. 

" Lectures on Political Economy, 1831, Lecture IV. 



NATURALISM 79 

about them. In his "Theory of the Moral Sentiments" 
Smith speaks somewhat scornfully, if not despairingly, of 
Stoics, Hedonists, and Intuitionists. He does not fully 
agree with any of them, nor wishes to admit more than a 
cursory acquaintance with their works. That he had 
bestowed some thought upon their preachments we may 
safely assume; but it hardly seems as though he had 
done them full justice. Instead he starts with a different 
idea, and develops it into a full-blown theory of ethics. 

The opening sentence of his "Theory of the Moral 
Sentiments" reads : "How selfish soever man may be sup- 
posed, there are evidently some principles in his nature 
which interest him in the fortune of others, and render 
their happiness necessary to him though he derives noth- 
ing from it except the pleasure of seeing it." Thus for- 
mulating the problem he proceeds to solve it, the general 
course of his argument being sufficiently familiar to all 
students of ethics. He leans toward intuitionism in that 
a potential power for moral judgment is taken for 
granted ; but he becomes an empiricist mainly by stressing 
the force of experience in developing this potency. He 
writes : "Upon whatever we suppose that our moral facul- 
ties are founded, whether upon a certain modification of 
reason, upon an original instinct called a moral sense, or 
upon some other principle of our nature, it cannot be 
doubted that they were given us for the direction of our 
conduct in this life." ^^ Such "rules of morality are the 
commands and laws of the Deity." '^'^ 

But if experience did not teach us, the faculty for 
judging would nonetheless remain dormant. A being 
brought up in complete isolation, we are told, could have 
no sense of right and wrong. So that, if we wish to trace 

the moral sentiment to its roots we must after all con- 

" Theory of tbe Moral Sentiments, Part III, ch. 5. 
" Ibidem. 



80 THE DEVELOPMENT OF ECONOMICS 

sider man as an integral part of his social environment. 
We may ask: "What is it which prompts the generous 
upon all occasions, and the mean upon many, to sacrifice 
their own interests to the greater interests of others?" 
answering: "It is reason, principle, conscience, the inhabi- 
tant of the breast, the man within, the great judge and 
arbiter of our conduct." ^^ But in the last analysis we 
come to another factor. Namely: "It is by the imagina- 
tion only that we can form any conception of what are 
his [the fellowman's] sensations. ... It is the impres- 
sions of our own senses only, and not those of his, which 
our imaginations copy." ^^ Sympathy thus is "fellow- 
feeling with any passion whatever" ; and "if we consider all 
the different passions of Human Nature we shall find that 
they are regarded as decent or indecent just in propor- 
tion as mankind are more or less disposed to sympathize 
with them."^^ Thus experience underlies the growth of 
moral sentiments. Utility is one, albeit not the sole, 
source of ideas on good and evil. We thrive on approval, 
and perish in ostracism. The social is the only outlet for 
our endeavors, however self -regarding the immediate end. 
Men cannot sin forever. As Cumberland had remarked 
much earlier, the battle between two opposing penchants 
is won for Good. Thanks to our habit of seeing the world 
through our own senses, working with simple ideas, and 
reconstructing them into concepts of vast complexity, we 
cower before the censure of conscience, doing right in 
spite of sore temptations. Introspective psychology thus 
helped Smith to find a logical basis for individualism, for 
Laissez Faire. 

This in a degree applies also, and finally, to Smith's 
views on method, so far as he had any at all. 

18 Ibidem, Part III, ch. 3. 

"Ibidem, Part III, ch. 1. ^ ^ 

20 Ibidem, Part I, ch. 2. See also ch. 1, first sentence. 



NATURALISM 81 

Logic had not traveled far when the "Wealth of Na- 
tions" was penned. The foundations for Mill's "Logic" 
had in a sense already been laid, but there was nothing very 
definite for Smith to work with, and out of his own mind 
he probably was not able to frame a clear-cut opinion. 
Logic was not his forte. However, something can be said. 

Francis Bacon had sounded a clarion call in his 
"Instauratio" and "Novum Organum" in which the in- 
adequacy of medieval logic furnished a leading theme. 
Induction, and complete induction at that, was held to be 
the only safe method for arriving at truth. The experi- 
mental method, comprising notably observation and meas- 
urement, stood out as the great contribution of the Re- 
naissance to modern science. Though nothing was said 
about its application to social studies it could not be 
long before somebody would make the attempt. 

And this honor fell first to Thomas Hobbes, the spokes- 
man of everything precise and systematic in the realm of 
human investigations. Moral philosophy, he boldly as- 
serted, must be considered after physics because it deals 
with the motions of the mind which "have their causes in 
sense and imagination." ^^ In his chapter "On Method" 
he differentiates clearly betwen de- and in-duction, urging 
the former for social science because it rested entirely on 
facts of human nature. Given these elements, it would 
not be difficult to explain such norms as the ethical and 
the intellectual. Nothing was made clear as to the scope 
of social science or the laws it might possibly establish, 
but in resting his case on psychology as the key to social 
problems Hobbes handed down a decision of no mean 
import. 

In Locke the theory of knowledge absorbs so entirely 
our attention that the methodological question is hardly 

21 Elements of Philosophy, Part I, ch. 6. 



82 THE DEVELOPMENT OF ECONOMICS 

given a thought. There is virtually nothing of impor- 
tance except it had been suggested by Hobbes himself ; as 
for instance the treatment of cause and effect, (where 
the idea of a correlation of variables is already vaguely 
broached) the principle of association, or the forceful 
discussion of probability and error. When at the end of 
his "Essay" Locke offers a three-fold classification of 
sciences the dearth of data for a logic of social science 
becomes unmistakable. We find one place assigned 
to "natural philosophy" whose end is "bare specula- 
tive truth; and whatsoever can afford the mind of man 
any such, falls under this branch, whether it be God 
himself, angels, spirits, bodies, or any of their affec- 
tions, as number and figure, etc." A second class 
deals with "the skill of right applying our own powers 
and actions for the attainment of things good and use- 
ful," and "the most considerable under this head is 
ethics";^" while a third is logic. Like Hume, the author 
of the "Essay" also believed in the certainty of moral 
knowledge since it is derived immediately from reflection, 
but of course this flirting with intuitionism was not con- 
ducive to a development of inductive logic. 

In Hume as well as in Smith induction is practiced 
more than preached. Thus, if the former declared: "We 
must . . . glean up our experiments in this science [of hu- 
man nature] from a cautious observation of human life, 
and take them as they appear in the common course of the 
world, by men's behavior in company, in affairs, and in 
their pleasures," ^^ he shows the application not merely in 
his "Treatise," but with signal success, for the time at 
which he wrote, in his "History of England." As a 
psychologist he might say. ". . . In the production and 

22 Essay Concerning the Human Understanding. 

23 Treatise, Introduction. 



NATURALISM 83 

conduct of the passions there is a certain regular mechan- 
ism, which is susceptible of as accurate a disquisition as 
the laws of motion, optics, hydrostatics, or any part of 
natural philosophy," ^* but as a moralist he was contented 
with much less, with variations incalculable, and with an 
implicit recognition of the limits of social science. In- 
deed, he never departed from his earliest conclusion 
that "all kinds of reasoning consists in nothing but a 
comparison, and a discovery of those relations, either con- 
stant or inconstant, which two or more objects bear to 
each other." ^^ The inconstancy of things impressed him 
most. He was therefore not pretentious in his sociologi- 
cal faith. He doubtless warned Smith, his admiring 
friend, not to expect too much from social analysis. 

Anyhow, Smith seems to have been at one with his 
countryman on the nature of human knowledge. He too 
was a phenomenalist who deemed knowledge hypothetical 
except where verification by the senses followed. Unlike 
Thomas Reid, his successor at Glasgow, Smith climg to 
subjecticism. Imagination, he says, in his paper on "Prin- 
ciples Which Lead and Direct Philosophical Inquiries, 
Illustrated by the History of Astronomy," is the basis of 
all knowledge. Without it science can do nothing; and 
this is true not simply from the standpoint of the artist 
who contrasts vision with a plain sense of sight, but like- 
wise from that of the philosopher who would understand 
the secret of all method. Beyond this admission. Smith 
used a common sense principle of work. He took the 
facts as they appeared to him. He has his eyes every- 
where and is a keen, yet a sympathetic student of human 
nature. He interests himself in many questions and dis- 
dains not to learn from the humblest peasant. He relies 

" Ibidem, in Essay on Passion, at the end. 
« Ibidem, Book I, Part III, § 2. 



84 THE DEVELOPMENT OF ECONOMICS 

as much upon personal experience as upon books or 
abstractions professionally distilled. He amazes us in his 
"Theory of the Moral Sentiments" with a wealth of illus- 
trations taken from daily life and put to excellent use. 
His charming character as Christian and scientist shines 
on many a page. To vitalize the inert, to return into the 
ooncriete the abstractest principle, this is his sincere 
endeavor in which none succeeded more nobly. Later 
critics have disagreed on the question of his method, some 
thinking it purely inductive, and others altogether deduc- 
tive, as for instance D. Stewart, John Rae ^^ and the late 
Wilhelm Wundt.^^ However, there is little profit in ban- 
dying words about it. The issue is not whether Smith 
adopted one or the other device, but whether the two are 
logically or psychologically distinct, or whether Smith 
committed himself definitely to any one plan of proce- 
dure, or whether, waiving this detail, he could lay the 
foundations for a science of economics by awy means. 
And here our answer cannot be uncertain, unless we rate 
substance higher than form. 

Formality does not seem to have counted much with 
the author of the "Wealth of Nations." He nowhere dis- 
plays any strong sense of logical sequence. In his ethical 
treatise he comes perhaps near to it ; but in that field for 
which posterity knows him best he composed with much 
freedom. Students have pointed out that probably the 
work grew under his hands in the writing of it, and with- 
out his being fully alive to the consequences involved. 
The main divisions suggest a lack of pretense to system- 
atization ; overlappings, repetitions, excursions, and con- 
tradictions abound. One need only to compare the style 

28 Sociological Theory of Capital, edited by Mixter, Ch. W., 1905, 
Appendix, Article 5. The original title of the work, which appeared in 
1834, was : Statement of Some New Principles on the Subject of Political 
Economy. 

" Wundt, W. Logik, 2 edit, vol. 2, Part II, p. 503. 



NATURALISM 85 

of the "Theory of the Moral Sentiments" with that of the 
"Wealth of Nations," to see the difference between a 
work long looked forward to, carefully developed along 
one line, even lingered over with pride, and one in which 
practical purposes rule above dignity or completeness 
of treatment. 

There is no better attempt at a delimitation of the suV 
ject in the "Wealth of Nations" than in James Steuart's 
"Principles of Political Economy," a work of great merit 
published in 1767, and the unity of which is, in one re- 
spect, more real than in its successor. For out of five 
parts in the "Wealth of Nations" only two deal with 
economics as a science, and all in all this portion consti- 
tutes only about one third of the whole survey. Smith, 
to be sure, treats Public Finance much more thoroughly 
than Steuart and excels in the analysis of price and 
shares, in historical mindedness, and in liveliness of dic- 
tion. But it will not do to dismiss therefore Steuart's 
work as inconsequential, as a mere relic of a mercan- 
tilistic age, which had no idea of science. Rather, there 
was logic in Steuart's leaving out history altogether, in 
assembling, as Justi had done for the Kameralists, the 
knowledge of the day on all economic subjects, the 
Physiocratic view alone excepted. 

Steuart's Political Economy. — Steuart begins with 
population and agriculture, and ends with credit and 
taxation. He devotes a disproportionate amount of space 
to trade and industry, but of course is moved by the 
interests natural to his group. Unlike Smith he thought 
of economics as an art rather than a science. He tells us 
at the outset: "The principal object of this science is to 
secure a certain fund of subsistence for all the inhabi- 
tants, . . . and to employ them ... in such a manner 
as naturally to create reciprocal relations . . . between 



86 THE DEVELOPMENT OF ECONOMICS 

them, so as to make their several interests lead them to 
supply one another with their reciprocal wants. . , . 
Political economy in each country must necessarily be 
different." In other words, applications must be stressed, 
and in the second place organization itself will vary as 
human will determines it. This is not, then, making a set 
of laws and exact definitions out of social inquiry, but for 
all that certain general principles underlie our activities. 
The premises are given by the known facts of human na- 
ture. Self-interest and expediency prevail in the long 
run, though duty and sex passion frequently defy the dic- 
tates of reason. Ethical norms, in any case, must not in- 
fluence the would-be economist. It is not for him to con- 
trast the Is with the Ought, but to separate them so as to 
ascertain facts regardless of their moral values. 

Smith's Idea of Prosperity. — In this Steuart antici- 
pated Smith, or rather was more consistent than the 
latter. For Smith disliked utilitarianism as then under- 
stood, and mused on the riddles of progress more than 
on the foibles of a straying individual. To him personal 
liberties seemed useless without the economic, and both 
became duties when viewed from the standpoint of our 
relation to Providence. Hence his silence on legal rights 
as a basis for economic analysis: hence the assump- 
tion of private property as something either due to labor, 
or brought into existence, perhaps by force, yet also with 
the sanction of an omniscient Deity. Smith could not get 
himself to believe anything else than that God kept vigil 
over human affairs. 

Dugald Stewart in his biographical sketch brings out 
this point. But it is made sufficiently clear in the "Theory 
of the Moral Sentiments" and in the economic trea- 
tise where Laissez Faire is presented as the only 
natural ideal of government. It is avowed to be best 



NATURALISM 87 

because of the fundamentals of human nature, because of 
the Design directing human history, because of differences^ 
in aptitude and the advantages of a division of labor. 
We are assured, as already seen, that self and society 
work naturally toward the same end. Sympathy and 
conscience curb one, vv^hile egotism or vainglory impel the 
other. No matter what the motive, the average result is 
the same: Mankind prospers in proportion as the indi- 
vidual is allowed to go his own wa}'-. At one point we 
are shown why protection to agriculture undermines in- 
dustry, thus depriving the farmer of his home market ; 
at another, that the "encouragement of industry is bad" 
because "no equal quantity of productive labor employed 
in manufactures can ever occasion so great a reproduc- 
tion" ^^ as agriculture. Close as well as distant views are 
taken of the situation, but throughout the argument is 
for freedom. "The great object of the political economy 
of every country is to increase the riches and power of 
that country," ^^ and that can only be done by respecting 
the natural harmonies. This was very much in the style 
of Adam Ferguson, who in his "Essay on the History of 
Civil Society" (1767) had written: "Men are tempted to 
labor and to practice lucrative arts by motives of in- 
terest. Secure to the workman the fruits of his labor, 
give him the prospects of independence, or freedom, and 
the public has found a faithful minister in the acquisition 
of wealth. . . . The statesman in this, as in the case of 
population itself, can do little more than avoid doing mis- 
chief." ^^ What more did Smith fight for? How else 
could he give point to his economic dissertation? It was 
the collectivistic aim, like Ferguson's or the Physiocratic, 
justified by an appeal to the best in human nature. Col- 

28 Wealth of Nations, Book II, ch. 5. See also Book IV, ch. 9. 
2* Book II, ch. 5. See also Stewart, D., Lectures on Political Economy, 
in his Collected Works, edit, of 1829, vol. 9, p. 3. 
30 Edition of 1819, p. 259. 



88 THE DEVELOPMENT OF ECONOMICS 

lectivism was part of the Naturalistic outlook, though it 
was forgotten or despised by the Utilitarians. 

A modern economist is not far wrong in writing: 
"Smith may be said to have fused all individual interests 
into one great national interest. He has nothing to say 
about enterpreneurs and laborers. . . ." ^^ That is ex- 
actly so. Smith saw the problem from a social stand- 
point. He emphasizes the material origins of all kinds of 
wealth. He has in mind stuff and energy in discussing 
value or labor. He is more interested in the national 
budget than in competitive accounting, and hence falls 
into many confusions when analyzing cost and price, 
capital and shares of the producing factors. What 
could be expected from a student who wanted a long-time 
vista rather than a cross-section of the present? Eco- 
nomics had not yet been elevated to the rank of an "ex- 
act'^ science ! 

Economic Doctrines. — But important concepts were 
made clear, serving to give prestige to the "Inquiry" 
almost as much as did his critique of mercantilism. There 
is, for instance, the imputation of wealth to labor instead 
of to nature, as the Physiocrats desired. In line with the 
ideas of Locke, Tucker, Hume, and Turgot the active 
agent in production is set apart from all natural re- 
sources. The congenital abilities of men are pointed 
out; education is given credit for multiplying productive 
powers and directing thought and energy into useful 
channels. Invention is not overlooked in the process, for 
the eighteenth century particularly had profited by it, in 
agriculture to begin with, and by 1776 industry also to 
some extent. Epoch-making mechanical inventions were 
soon to be made. It was as if the "Inquiry" had reckoned 

»^ Pierson, N. G., Principles of Economics, transl. by Wotzel, A. A., 
vol. 1, p. 10. 



NATURALISM 89 

with this industrial revolution and tried to generalize 
upon the experiences which it offered to economics. 

By prudent use of the stock in hand labor was shown 
to benefit constantly, no matter how slow the adjust- 
ment. From labor came capital and savings, but to labor 
also went wages above subsistence. Not waste by para- 
sites, as Mandeville had sponsored it, but thrift among 
workers would enrich the nation, giving variety to our 
mode of living and providing for the Exchequer that 
revenue without which all nations were powerless when at 
war. The soil, to be sure, might give out now and then, 
or yield fruits only after much coaxing in response to 
long hours of toil; but man was his own captain and 
savior; he could add labor-saving devices to offset the 
penury of nature, or proportion his outlay on agricul- 
ture, industry, and trade so as to outstrip other countries 
in the race. It was a question of arranging the different 
productivities of different fields of work in a certain or- 
der, of giving men free rein in their quest for employ- 
ment, of letting supplies flow freely where demand seemed 
to be most pressing. Nothing was gained by regulating 
men where nature had already provided the best spur to 
maximum productiveness. Free-trade therefore was 
good, and paternalism bad. In banking perhaps a mini- 
mum amount of supervision would help, but in general 
the individual was to judge for himself. 

This seemed reasonable in an age where the masses were 
just completing their emancipation from the fetters of 
feudalism. What manumission had meant to the four- 
teenth century, and the "liberties of the subject" to Puri- 
tans, that the next age expected from a universal ballot, 
from reforms in representation, freedom of contract and 
of vocation. It was necessary, as Smith saw it, that pro- 
duction and exchange be as unhampered as an expression 



90 THE DEVELOPMENT OF ECONOMICS 

of political opinion was at electioneering. The chain of 
progress, he would have said, runs from division of labor 
to rising efficiency ; from there to surplus and savings, 
and then further to the development of capital and a 
rising percentage of producers in the population. Na- 
tional power could not unfold itself any other way, nor 
could mere affluence of certain people measure progress. 
For at last analysis nothing was so fine a test for national 
vigor as a high density per square mile. "The most deci- 
sive mark of the prosperity of any country is the increase 
of the number of its inhabitants'^ ^^ — increase, be it noted, 
not density alone, for when the latter was at its maximum 
a nation might reach a stationary condition. Smith 
therefore was in accord with earlier writers like Colbert 
in France, Seckendorff, Conring, and Justi among the 
Germans, and Harrington, Temple, Child, Locke, and 
Petty in his own country. He frequently evinced his in- 
debtedness to others, though giving a moral tinge to his 
decisions such as others cared little about. 

In fact, this moral undercurrent in a sense was the 
undoing of Smith, for it packs his treatise with inconsis- 
tencies that have never ceased to interest critics. Both 
as pioneer who opened a new field and hence left many 
vague concepts, and as theist who seeks new norms Smith 
was likely to puzzle posterity. 

How many definitions, for instance, of capital and 
cost ! How variable the stress of different aspects of one 
and the same thing at different times ! How noticeable 
the mixture of competitive and non-competitive norms ! 
How tantalizing the law of price, whether of wage or of 
goods 1 At one time supply and demand as guide to all 
values ; at another cost in effort, or again pecuniary out- 
lay. "Natural value" alongside of alternative costs in 

« Wealth of Nations, Book I, ch. 8, 



NATURALISM 91 

labor ; utility ranking with scarcity as a key to value ; 
wage as a rate or as a share assigned to labor in general 
during a year. It is impossible to tell how much market 
prices are allowed to deviate from the "natural," or 
whether prices cover incomes, or not. 

In trying to cover all the facts, especially the variety 
of exceptions for every rule, Smith was enticed into ad- 
missions that made a strict logic of methods impossible. 
There was no doubt that a new vision had been given 
to the world in his "Wealth of Nations," but it might 
have been predicted also that a science of what is could 
not succeed, until the last remnants of a doctrine of 
Ought, which still clung to Smith, had been disowned as 
something incongruous and detrimental. And this was 
a step taken by his successors who understood him only 
to a certain extent. 



CHAPTER FOUR 
UTILITARIANISM 

I. Premises 

Environmental Changes from 1776-1900. — Since 1776, 
when Smith's "Inquiry into the Nature and Causes of the 
Wealth of Nations" was given to an expectant world, our 
social environment has changed so as to make a compari- 
son of the two eras difficult. When Smith wrote his main 
work agriculture was still the dominant industry of Eng- 
land. The soil still fed the entire population and even 
left a slight surplus for export. The population was less 
than a quarter of what it is to-day. The vestiges of the 
manor system had not yet disappeared from the land- 
scape, nor from the statute books. The people were, with 
the exception of a few localities, scattered thinly over 
the land. Privilege was for the nobility, and the House 
of Lords kept on disputing supremacy with the Lower 
House. To gauge the prosperity of the country one 
traveled over the highways and byways in a coach, esti- 
mating crops, reporting on the improvements made on 
glebe or the commons. The journals of the day and the 
better known surveys of A, Young remind one of this 
rural, Merrie Old England. It was not unnatural for 
Smith to have thought only of wage-earner, landlord, 
and enterpriser as long as economic organization was 
simple and the status of each class definitely determined. 

On the continent too wealth consisted chiefly of land. 

92 



UTILITARIANISM 93 

That is, there too agriculture was, barring certain re- 
stricted regions of manufacture, the mainstay of the 
people. Manu-facture was not yet a misnomer for the 
production of most commodities, for mechanical power 
was unknown ; the hand did nearly all the fashioning, the 
implements were few whether one worked as a farmer or 
as an artisan or miner. Indeed, the conditions for a 
marked change were more nearly ripe in the British Isles 
than elsewhere, as the trend of history soon made clear. 
It was not difficult to arrive at a conclusion as to the cir- 
culation of goods or the price-making factors while the 
village was still largely self-sufficient, the organization of 
business simple, and the right of each claimant to the so- 
cial dividend traditionally defined. If government inter- 
ference had lost vogue it was largely because markets 
were still of a restricted area, because local self-sufficiency 
was a real economic factor, and because the interdepend- 
ence of nations was grouped about non-essentials mainly. 
Necessities had not yet become a notable part of over- 
seas commerce. 

But all this was changed during the next hundred 
years. By the time J. S. Mill composed his "Principles 
of Political Economy'^ the world had undergone decided 
changes ; new characteristics had displaced those Adam 
Smith knew so well. 

Just a few years before the publication of the "Wealth 
of Nations" Australia was discovered. Since then no 
great mass of land has been added to our map — unless we 
include the antarctic regions — ^but exploration opened up 
the interior of the continents whose coastal lines earlier 
adventurers had sketched in the rough. Enormous riches 
came to view in the course of this surveying and applying 
of modern science. All our expectations were exceeded 
by the developments in the Americas and in Africa. The 



94 THE DEVELOPMENT OF ECONOMICS 

yields of gold and silver that most impressed the sixteenth 
century ceased to figure prominently in modern accounts, 
in spite of their unprecedented volume and weight. Other 
natural resources came to mean so much more to us : 
Timber and iron and coal, the catch of the fishing fleets, 
the fertility of virgin soils extending over vast drainage 
basins, the commercial value of waterways, hydraulic 
power, and the appearance of rare minerals indispensable 
to modern industry and warfare. As a general result of 
such accessions new in kind and quantity nations swung 
themselves up to higher material levels of living. What 
was once the privilege of the few by degrees became the 
property of the many. Luxuries became necessities, and 
the annual wage that formerly would have sustained a 
large family now sufficed scarcely for a single laborer, 
however crude the services he might render. 

Correspondingly, too, density of population was meas- 
ured by different standards, for two square-miles now 
harbor as many people as five once. In England where 
economics first became a subject for popular study the 
number of inhabitants, not counting Ireland, increased 
from nine to thirty-five millions. In France the increase 
amounted at least to fifty per cent, in Germany to about 
one hundred and fifty per cent, and for all Europe to 
nearly one hundred per cent. The United States of 
America had a little more than three million inhabitants 
when the first census was taken (1790), ten times that 
number at the outbreak of the Civil War, and over a 
hundred million in 1920. Big cities have sprung up in 
the Old and in the New World, some of them growing from 
country towns to the dimensions of a metropolis. Enor- 
mous congestion at these centers, and a general gain of 
the urban element have contributed to the feeling that 
economic and legal relations must be nicely defined and 



UTILITARIANISM 95 

constantly supervised if peace among individuals or 
among nations is to be preserved. 

However, science and industry did much to counter- 
balance the pressure of population. Discoveries and in- 
ventions have enabled us to do what was impossible to the 
contemporaries of Adam Smith, or on the other hand to 
do it in only a fraction of the time, improving on quality 
and serviceability besides. What seemed like a unique 
Industrial Revolution at the end of the eighteenth century 
in England has since been followed by changes just 
as momentous and spread over a far larger area in 
Europe and in the western hemisphere. The substitution 
of mechanical for human or animal power was the first 
step toward an incalculable development of natural re- 
sources. Machino-facture displaced manu-f acture ; the 
domestic system was replaced by the factory system ; per- 
sonal ties between employer and employee gave way to 
purely legal ties; division of labor to specialization and 
integration of processes multiplying wonderfully the pro- 
ductivity of men, though also cramping their faculties of 
mind. Large-scale production seemed to demand this 
sacrifice. Capital intervened between producers so as to 
divide them into groups with distinct, often irreconcilable, 
interests. Saving was still important, but ingenuity and 
captaincy vastly more so. Investments counted, and land 
no longer measured wealth. To own a surplus was every- 
thing, but how it was acquired was less than ever a ques- 
tion of personal diligence or mastery of a craft. The 
metamorphosis that was so evident to the eye called also 
for a metamorphosis of minds, or at least for a shifting 
of emphasis from the mastery of subjects to a mastery of 
men ! He who knew how to organize material and men in 
their legal relations under freedom of contract did 



96 THE DEVELOPMENT OF ECONOMICS 

better than he who grasped merely their technical 
interdependence ! 

A roundabout process of production was shown to 
bring the best results. Though the initial expense might 
be enormous, it paid in the end, for the flow of goods was 
so regular, the yield so colossal that nations grew richer 
than ever. Indirect methods of production, ramified tech- 
nical cooperation, the objectification of personal assets 
and endeavors through capitalism, and the economic in- 
terdependence of peoples the world over — such became 
outstanding features of modern life. The socio-economic 
mechanism had become incredibly complex. 

Nothing but a marvelous development of the means of 
communication and of transportation could meet the re- 
quirements of this most recent situation. Nothing short 
of decided changes in popular ideals and professional 
knowledge could be expected in return. 

Communication by degrees served relatively less for the 
exchange of news and views, and more as an indispensable 
link in the chain of want, effort, and gratification. Mar- 
ket conditions had to be quickly appraised and put at 
the disposal of parties separated by many hundreds and 
even thousands of miles. Equalization of demands in 
point of time and place resulted from this interchange 
of intelligence and served to economize labor, besides 
leveling prices and profits. For rapid transit the tele- 
graph proved as valuable as steam-power itself ; and from 
the standpoint of government nothing was more needed 
than an apparatus by which outlying districts of admin- 
istration could be swiftly reached, for instruction or 
inquiry, as the case might be. National consciousness 
depended on uniformity of beliefs and customs, and ra- 
pidity of communication took first place as an agency 
for bringing this about. 

Hence the progress in communication must be con- 



UTILITARIANISM 97 

sidered one of the essentials to an understanding of nine- 
teenth century economic developments. The variety of 
devices invented to convey and preserve thought is as 
remarkable as the diversification of our material prod- 
ucts for daily consumption. Sound and sign — or in 
Greek words, phone and graph — gained prestige in the 
economic sense no less than in the wider intellectual. 
Everywhere symbols, audible and visible: Telephone and 
telegraph, radiograph and automatic telephoning, phono- 
graph and dictograph, rotary press and multigraph, 
photography and kinematograph, linotype and type- 
writer machines — all these and more rendered service, 
shortening distances, carrying thought with lightning 
speed, multiplying our records and preserving them as 
tone or letter. 

Transportation not unnaturally kept strides with this 
revolution in communication. The railroad and the 
steamship at the very beginning of the nineteenth cen- 
tury were discussed as feasible instruments of traffic. 
Steam displaced muscular energy, and rails the once in- 
dispensable pike. Yet steam-roads have found a rival 
in eleetric traction, while automobile and aeroplane 
have in part at least made us independent of iron tracks. 
Sailing ship and stage-coach still have their uses, but the 
business world has long since found them inadequate. 
What is wanted is high speed, regularity and frequency 
of movements, safety and utmost comfort, cheapness 
and independence of weather conditions. Thus only can 
the productive machinery be kept going; thus only 
can the whole earth serve as a single market in which 
nations bid against one another, as once upon a time 
individuals at a fair. Perishables can thus be trans- 
ported over vast distances and seasonal products ibe 
supplied the whole year round. Large markets and 
localization of industry go hand in hand. To produce 



98 THE DEVELOPMENT OF ECONOMICS 

cheaply the scale of operations must be large, but to 
maintain huge plants year in year out sales must extend 
over large areas, catering to thousands, if not to millions-, 
seeking an outlet in foreign lands, and tending to equalize 
supplies very much as telegraph and long-distance phone 
help to equalize demands. 

Naturally such transformations gave a new aspect to 
our general mode of living, and to our economic organiza- 
tion. The simplicity pictured by the founders of eco- 
nomics no longer obtains in these days, nor is it likely to 
return. The technological changes mentioned involved a 
realignment of producing factors and of distributive 
agents. They added many members to the group which 
during the eighteenth century was held to supervise the 
entire process of production and exchange. New prin- 
ciples and irregularities have necessarily appeared in the 
economic life of nations. Economic theory was not only 
bound to take cognizance of these modifications, but it 
was pressed more and more to ask whether its allowances 
were quite sufficient. The last few generations, in other 
words, not merely witnessed a decided change in the view- 
points of economic students, but they furthermore 
amassed knowledge that the science of economics in par- 
ticular did not fully utilize. The breach between the 
one and the other widened in spite of the adaptations 
noticeable in economic literature, and if no other reason 
could be assigned it would be doubtless the old one that 
movements of thought usually overlap, proceeding at 
divergent angles no matter how much their leaders try 
to keep in touch with one another. 

Ideas on many subjects changed of course pari passu 
with the change of external conditions, that is of means 
of production and modes of consumption. 



UTILITARIANISM 99 

For example, the average man^s knowledge was en- 
larged, and a leverage provided whereby personal claims 
to wealth and rights could be made a potent political 
force. Illiteracy has become much rarer, and a tolerant 
if not enthusiastic regard for learning more common. 
The higher institutions of learning instruct hundreds of 
thousands when formerly they were open to only a few 
select of the upper social strata. The cost of education, 
like things to eat and wear, was lessened particularly 
during the second half of the last century, and perhaps 
most of all in the United States where nature gave 
with such a lavish hand. The democratic ideal has been 
put to a test nowhere more than in the educational field. 
The older notion that human capacities are comparatively 
fixed and unequally distributed has given way to the 
assumption that the majority can be taught to think, and 
to master a given subject. Thus the results of scientific 
research were increasingly put before a curious public. 
Public school attendance was enforced and prolonged. 
Lower strata rose to affluence and power through oppor- 
tunities bestowed freely, with the help of carefully trained 
teachers, and at the behest of governments who deemed 
no investment as profitable as money spent for class-rooms 
and laboratories. 

The general result was a dissemination of knowledge 
among the masses who formerly eked out a bare existence 
in ignorance and despair. But the process has not yet 
gone so far as to develop the average man's powers 
of reasoning as well as his ability to assimilate facts. 
A little knowledge for everybody turned out to be, as so 
often has been lamented, a dangerous thing, since doubt 
was cultivated more than faith. And doubt could easily be 
resolved into suspicion and restlessness. An interminable 
procession of readings and lecturing through the daily 



100 THE DEVELOPMENT OF ECONOMICS 

press and the omnipotent popular magazine, through par- 
tisan organs and soap-box orators promoted criticism 
more than cooperation. In its desirable form this agi- 
tation for more power came to mean a universal man- 
hood (and in some countries womanhood) suffrage, the 
representative principle of government gaining ground 
everywhere. At the other end however it brought acts of 
violence, consolidations for group-aggrandizement, an in- 
tensification of class-consciousness, and hence indirectly 
a greater need for centralized control, whether to curb 
capital or to safeguard the interests of a responsible 
minority. The functions of government therefore aston- 
ishingly expanded since the birth of Laissez Faire. A 
natural trend toward complexity in economic affairs was 
accentuated by the desire of legislatures to adjudicate 
cases that, according to classic economics, belonged alto- 
gether to the individual. Natural science and applied 
science were accorded a place in public control irrespec- 
tive of what social science had advocated. Only of recent 
years could economists see their way clear to an accept- 
ance of policies which, thoug'h furnishing materials for 
social science, had certainly not met with the approval of 
its first designers. 

Nineteenth Century Science and Philosophy. — It 
goes almost without saying that changes in political 
opinion were accompanied by changes on other points 
of doctrine whose bearing upon the development of 
economics is real, however difficult it might be to trace 
them in detail. The rapid growth of scientific informa- 
tion, e. g., influenced economics both by way of applied 
science and through the mediation of philosophy in 
the narrower sense. Of the fundamental sciences only 
physics and chemistry had progressed far by the end of 
the eighteenth century, unless mathematics be here also 



UTILITARIANISM 101 

considered as a science. Biology and psychology had 
lagged behind from the outset ; but since Adam Smith they 
have changed radically in contents, aims, and methods. 
Economics itself led the way among social inquiries, while 
the continued study of nature added innumerable special 
sciences to our catalogue, most of them eventually modi- 
fying the views of an earlier age. With new and 
incomparably improved instruments for measuring mag- 
nitudes, most relations between things had to be inter- 
preted. Precision and reliability gained immensely, but 
on the other hand men felt less cocksure of a number of 
propositions, and slowly the old questions arose again, or 
were treated with a respect that eighteenth century 
prophets would have wondered at. Definitions were re- 
stated and revised again. Boundary lines between ap- 
parently strictly distinct fields of inquiry were shifted 
or became blurred. One science took over the work of 
another, and overlappings became permissible because 
none would undertake to act as arbiter. Thus new con- 
clusions and hypotheses, new units of measurement and 
ever larger questions continued bobbing up. In so far as 
possible, theorems were applied and served to alter the 
economic environment. Engineering, agronomy, medicine, 
manufactures of various sorts, and our network of com- 
munications are the most obvious instances in point. 
But as against these triumphs there still remained prob- 
lems and speculations along traditional lines, whose ef- 
fect the economist could not altogether escape. 

Indeed, it should not be forgotten that economics 
sprang directly from philosophy, and only mediately 
from natural science. For as has been shown, it was 
from a wish to establish a logical connection between ques- 
tions of ultimate value and the social processes that men 
studied these latter. When economics was young and a 



102 THE DEVELOPMENT OF ECONOMICS 

demarcation of its bounds correspondingly hazardous, the 
union of philosophy and social science was natural. One 
took for granted that the best preparation for the latter 
was a good acquaintance with the former. The Kamer- 
alists and the Physiocrats were philosophers more than 
exact scientists. Adam Smith established a good prec- 
edent in his university lectures on moral philosophy. 
As J. S. Mill put it in his essay on Comte: "A per- 
son is not likely to be a good economist, who is noth- 
ing else." It was true certainly in the earlier period of 
economic thought, and even later we find substantiation 
in the works of such leading lights as J. S. Mill himself, 
of his father James Mill, of J. Bentham, Archbishop 
Whately, W. S. Jevons, H. Sidgwick, and — in America 
among others — PI. C. Carey and F. Bowea. 

In view of this union of philosophy and economics 
in each of the men mentioned, and of course also in certain 
others, one naturally expects philosophic history to have 
affected the growth of economics. Its literature, to be 
sure, leaves one very much in doubt. Cross-references are 
few and far between, and of specific cases in which eco- 
nomic argument was due altogether to philosophic theories 
there appear to be none. What we can say is that probably 
many economists remembered their university training in 
certain philosophic subjects, kept abreast of their times 
and permitted such contemporary speculations to color 
their arguments or to suggest an approach. And then, 
of course, there is that residuum of dependence which a 
perusal of many economic treatises reveals, and whose 
import is so candidly professed by some pioneers of Utili- 
tarian and Marginal economics. 

To illustrate the connection from only two problems in 
philosophy, namely, those of truth and virtue: Economics 
was strengthened by the empirical outlook as regards the 



UTILITARIANISM 103 

first, but drawn toward what may here be called the 
transcendental view in its treatment of ethics. That is 
to say, economics was itself assuredly a by-product of 
empiricism and of the emergence of natural science out 
of the Renaissance. The demand for an examination of 
evidences, for experimentation and exact tests, for a be- 
lief in the reality of the world about us and in man's 
ability to know things definitely — this demand called into 
being social no less than natural science, and true to this 
precedent economics was separated from theology and 
moral philosophy. Besides, need one repeat that Comte's 
sociology and J. S. Mill's "Logic" give the finest proof of 
the philosophical foundations underlying much economic 
theorizing.^ 

However, it is true that while all knowledge was held 
to be experiential, the metaphysical question of reality 
and of mind being variously answered, on other matters 
economists agreed with the Absolutistic philosophy, with 
German Transcendentalism and Idealism generally. Few 
economists, if one may judge from leading works, con- 
cerned themselves in any way with the question of reality 
and truth, with the relation of things to values, and of 
Self to the Universe ; but they did separate truth and 
virtue in Kantian style. They set religion aside as some- 
thing alien to social inquiries ; and they discussed method- 
ology as if induction and deduction were opposites or at 
any rate categorically distinct, nay, usable at will ac- 
cording to aims pursued. 

Furthermore, — and this last but not least — the Trans- 
cendental school of philosophy since Kant is mainly at 
the root not only of all modern historism, but, in particu- 
lar, of economic historism. In the eighteenth century lie 
the germs of nineteenth century relativism. In Hegel's 
dialectic Marx and the Historical School of economists 



104 THE DEVELOPMENT OF ECONOMICS 

found inspiration for labors whose one goal was the 
dynamic interpretation of life. The idealistic undercur- 
rent in Hegel was disparaged. The pragmatic out- 
growths of a later epoch were adjudged seemingly as of 
no consequence for a theory either of pricing or of pros- 
perity. But the unifying force of the historical concept 
made itself felt in virtually all economic literature since 
1800. Ricardo is an exception that might be used to 
prove the rule. 

The Hegelian logic left its impress, vaguely but indel- 
ibly, upon economics because it found support in scientific 
discoveries and was a natural starting-point for a criti- 
cism of any static social theory. 

The nineteenth century was the age of Evolution, and 
it was the evolutionary view which could most readily be 
deduced from Hegel's metaphysics. All things to be 
judged as to time and place! A mighty principle every- 
where at work ! An age in which nothing was made clearer 
than the instability of things and thoughts! An age 
which could boast of a Darwin, Spencer, and Wallace, of 
a Huxley, Haeckel, and Weismann, of a Lyell and a 
Baer, of paleontologists and philologists, of philosophers 
of history and of genetic psychologists, of a Bergson and 
Nietzsche, of "periodic laws" in chemistry and of plane- 
tesimal theories in astronomy. Everything real and valu- 
able only for a while! All things becoming and ending! 
Nothing true except for person, place, and period ! Prag- 
matism as a theory of knowledge, or as a key to Logic. 
Mind as behavior, and belief as proof. All achievements 
for the moment, and nothing above a testing. The Bible 
thus but a book, and only a book. Religion all too 
human, and foredoomed to change with time. In short, 
nothing left but a reference of values to individual wants ! 

It cannot surprise us if in at least some of its phases 



UTILITARIANISM 105 

this philosophy appealed to economists, prompting them 
to a revision of premises and principles, even though in 
the main Absolutists led the way. In fact, empiricism and 
transcendentalism, pragmatism and historism in the 
larger sense — all four manners of philosophizing found 
a place in economic literature. But broadly speaking, 
their consideration was so slight, and the doctrine so 
flexible, that economics had nothing to expect, or nothing 
to fear, from any of them. Specialization itself made dif- 
ficult a sympathetic insight into metaphysical problems, 
and the practical needs of the time further directed the 
course of economic investigations. The progress of eco- 
nomics, for this reason, must be sought in steps taken in- 
dependent of philosophic movements. Developments after 
Smith are measurable entirely by what economists as such 
wrote after him. 

Economics from 1776 to 1817. — ^When Adam Smith died 
in 1790 his work had already made him famous. He had 
the satisfaction of seeing his treatise praised by a large 
number of experts both in his native land and elsewhere. 
Five editions of the "Wealth of Nations" were published 
during his lifetime. Men prominent in public affairs paid 
tribute to his genius and labored to make him known in 
high official circles. Pitt the Younger was among his 
admirers. Parliament complimented him and hastened 
to test out some of the principles enunciated. The stir 
that Smith's message created was the greater since no 
words for economics anywhere near so convincing and 
thorough were spoken for several decades to come. 
Smith seemed to have exhausted the subject in a single 
discussion. Monographs on a variety of topics, but add- 
ing little to social science as a whole, constitute the only 
contributions during the Napoleonic period. Men wrote 
on rent, on the essence of wealth, and on population. 



106 THE DEVELOPMENT OF ECONOMICS 

Malthus in 1798 aroused new interest by his "Essay on 
Population." The Earl of Lauderdale offered a stimu- 
lating and by no means one-sided commentary on some of 
the blemishes in Smith's great work. Bentham and God- 
win added volumes on political science, morality, and 
jurisprudence, but none of primary significance for eco- 
nomics. No departures of any moment were attempted. 
The materials that v/ere piling up for a revision had not 
yet fallen into right hands, and obscure authors labored 
unrewarded. The times too were not propitious, since the 
French Revolution had begun to overshadow everything 
else. Thinking people watched the drama at Paris. 
The progress of events first pleased, then baffled, then 
disgusted, and finally frightened observers into apathy 
or vehement protest, according to temperament and 
responsibilities. Normal interests were forgotten over 
the incredible, grotesque, terrorizing news from across 
the Channel. A Burke was more likely to be heard 
than a Godwin, though both had an audience to appeal 
to. And then the wars, the defensive ones of the Na- 
tional Convention, the retaliatory of the Directory, and 
the aggrandizing of Napoleon Bonaparte ! Twenty years 
of campaigning in which the resources of all Europe were 
pressed into service. So far from our wondering at the 
paucity of economic literature during this epoch, we 
should rather marvel at what was written. For after all 
there was Germany and France whose appreciation of 
Smith had many echoes, to say nothing of the idealistic 
philosophy, of literary romanticism, and the communistic 
propaganda of French reformers. 

In Germany the first translation of the "Wealth of 
Nations" appeared as early as 1778, though the better 
ones came later, of which many editions seemed needed to 
satisfy a widespread demand. If one may believe Roscher, 



UTILITARIANISM 107 

who went into the question, the reception accorded to 
Smith's ideas was not cordial everywhere, yet there came 
forth scholars from all sides who openly espoused the new 
cause. Hostile reviews were the exception. Indifference 
prevailed at first among the older group of economists, but 
this too gave way to a willing examination of the English 
masterpiece. The greatest handicap for any systematic 
treatise was not the German's personal bias, but his im- 
mersion in either Kameralism or metaphysics. Those 
specializing in economics had not yet learned to distin- 
guish between science and art, or between economics in 
particular and moral philosophy in general. The intellec- 
tual ancestry of German economics was against its be- 
coming easily a science of universal laws. As we have seen, 
the practical aim everywhere determined the lines of 
investigation. Theology had not lost its hold on Kamer- 
alism. Theories of state vitiated economic analysis. The 
center of interest was not the individual, but the com- 
munity or the dynasty. But on the other hand the genius 
of the people shone most brilliantly in speculations on 
the Infinite and Unknown, Kant opening a new era by 
his metaphysics and ethics, while Fichte, Schelling, Hegel 
and Schopenhauer continued the search for an Ultimate 
Reality. Schleiermacher was more native to German 
soil than a Utilitarian could ever have been. The per- 
spective of a Goethe did not fit in well with the exhorta- 
tions of a Fichte that his countrymen become clear-sighted 
and practical. Herbart's psychology was intelligible be- 
cause it formed a part of the reaction against transcen- 
dentalism; but empirical studies like the British would 
nonetheless have had a hard fight. Characteristically the 
German philosophers said little or nothing on economics, 
Fichte's half-socialistic work being a notable exception, 
and for teachers on the subject nothing counted more 



108 THE DEVELOPMENT OF ECONOMICS 

than the political bearing of Manchestrianism. To them 
the commercial question was fundamental. If economics 
really was a science, then it should have advice to give 
to princes and merchants. 

Put differently, Adam Smith was appreciated by the 
German economists either because he urged free-trade, or 
because flaws in his reasoning played into the hands of 
the protectionists. The national movement favored this 
prejudicial treatment of his work. Nothing seemed left 
after the final collapse of the "Holy Roman Empire" ex- 
cept a rebuilding with materials that would speedily unite 
all parties by concerted economic action. And what was 
more calculated to rehabilitate the impoverished land 
than a customs-union embracing the whole German race? 
A plea for Non-interference therefore not only offended 
believers in an enlightened autocrat, but besides was in- 
compatible with a strong nationalistic sentiment. Only in 
one respect had British economics a chance among Ger- 
mans, namely in that the whiff of democracy and personal 
liberty animating it was welcome to progressives and 
broad-minded statesmen like Hardenberg and Stein, who 
saw what was wrong in Prussia, who divined the causes 
of the German defeat, and desired a break with the past 
more than anything else. So far of course they could 
see good in the French Revolution, and still more in a 
social science whose first premise was the self-direction 
of individuals for their personal good. 

The critics, for this reason, could not carry the day 
without adopting in large part the principles of the 
Scotchman. Though exception was taken to details, and 
doubt was expressed as to the universality of the laws 
proclaimed by the author, his general viev/point won in- 
stant applause. Men like Kraus, Sartorius, Lueder, 
Luden, Hufeland, and Lotz undertook to acquaint the 



UTILITARIANISM 109 

German public with the Laissez Faire doctrine. Jakob, 
whose strength was philosophy even more than political 
economy, defined the latter, not quite in the manner of 
Smith, as the "science dealing with the nature and causes 
of national wealth, with regard for the influence of social 
institutions and positive legislation." ^ His contempo- 
rary, Mueller, injected a theological tone into the mat- 
ter, and dwelt more on policies than on theory. To him 
*Hhe state is the greatest of all needs of man, the need 
both of his heart, his mind, and his body. Man without 
the state can neither hear nor see nor think, feel, nor 
love. In short, man apart from the State is unthink- 
able." ^ Sentiments like these deserve mentioning be- 
cause it is easy to exaggerate the fidelity with which the 
Germans copied Adam Smith. When all is said and 
done, their imitation did not consist in a granting of the 
premises which Smith took from a long line of ethicists, 
psychologists, political philosophers, using them discrimi- 
natingly in developing his "Theory of the Moral Senti- 
ments," but rather in an agreement to his main conclu- 
sions, or to his analysis of price and income. His account 
of the mercantilistic program is noted more frequently 
than his logical innovations ! 

There was indeed something lacking in the perfection 
of the work so long as its external structure was not re- 
built by a more skillful designer. And so one might 
argue that a considerable measure of the influence ex- 
erted by the "Wealth of Nations" is due, not to its in- 
trinsic merits, but to J, B. Say, the Frenchman, who for 
the first time gave economics a definite form, putting his 
materials under precise captions, thus inaugurating a 
custom that has never been abandoned since. 

^ Quoted by Roscher, W. Geschicbte der National okonomik. In 
Deutschland, 1874, p. 688. 

2 Elemente der Staatskunst, 1808, Introduction. 



110 THE DEVELOPMENT OF ECONOMICS 

As in Germany, so in France translations of Smith 
were swiftly undertaken, the first dating from 1781, and 
others from the next decade. There was enough call 
to justify several editions, for in the first place the 
Physiocrats were more akin to Smith than the Kameral- 
ists, and in the second place France had for a century 
found inspiration in British thought and policies. Thus 
the interest of Frenchmen, which between 1790 and the 
establishment of the Empire in 1805 had been focussed 
upon legislation and politics, passed easily over into re- 
spect for a doctrine which purported to outline funda- 
mentals of government. A treatise on political econ- 
omy, if decked out in suitable dress, could hardly fail to 
impress the heirs of Physiocratism. 

Say must therefore be regarded as a notable factor in 
the dissemination of Smithian ideas. He popularized the 
new economics by restating it in precise terms, adding 
elegance and verve to the flow and clarity with which 
Smith himself had written. But what is more, he di- 
vides his subject into three main parts, all of which to- 
gether constitute, as he takes pains to make clear, the 
science of economics.^ Production is first treated, just 
as in the "Wealth of Nations," but to the exclusion of 
a price analysis. On the contrary, exchange is incor- 
porated with Book One because, unlike Smith, Say con- 
ceded a productive value of services other than those of 
manufacturer or farmer. Exchange hence is a specie of 
production, and probably in harmony with this concept 
much is said in the first part on commerce and currency. 
Book Two then discusses distribution, that is the ap- 
portionment of the annual income among the producers, 
value and price being dealt with ahead of the revenues 
of land, capital, and industry. In the fourth French 
' Translation of Prinsep, C. R., 1821, edited by Biddle, C. C. 



UTILITARIANISM 111 

edition we are told at the beginning of the chapter on 
distributive laws that "the causes, which determine the 
value of things, and which operate in the way described 
in the preceding chapters, apply without exception to 
all things possessed of value, however perishable; 
amongst others therefore to the productive service yielded 
by industry, capital, and land, in a state of productive 
activity." 

This surely is something worth while — an amplification 
of Smith's treatment that cannot be rated too highly. 
Price hereafter will figure as a bundle of income-shares. 
To explain price is to explain shares. Distribution and 
Price, as categories in economics, are complementary like 
two sides of a piece of paper. We can consider them 
separately, but they belong together. It agreed with 
this scheme that Say placed utility above labor in the 
accounting for value, and made expenses contain much 
more than what Smith had at times permitted himself 
to insinuate. Indeed, Say went so far in his stress of 
the subjective side of value that he despaired of being 
able to measure it exactly, mainly because "subject to 
the influence of the faculties, the wants and the desires 
of mankind." Ganilh, a few years later, echoed this sen- 
timent of his countryman, but without being as sure of 
the method by which economics was to succeed. 

To Say the method of economics was as settled a ques- 
tion as the external structure. If in Book Three he con- 
sidered Consumpton, including Public Finance, this was 
an acknowledgment of the human basis of social events, 
the wants and rights of a consuming public being the 
terminal as well as the point of departure for economics. 
Consumption, he saw, could not be ignored in an exam- 
ination of revenues. The interest of the government in 
consumption was as natural as once had been its interest 



112 THE DEVELOPMENT OF ECONOMICS 

in trade or manufacture. But precisely on this account 
it followed that the method of economics had much in 
common with that of other sciences ; for a few postulates 
pivoting on facts of human nature would suffice to de- 
velop an imposing superstructure. So we are informed: 
"Political economy, in the same manner as the exact sci- 
ences, is composed of a few fundamental principles, and 
of a great number of corollaries or conclusions drawn 
from those principles." ^ Deduction must predominate, 
even though the inductive kind of reasoning is preferable 
where possible. Say's ^'Treatise on Political Economy" 
bears out this thought, for in spite of much illustrative 
material the argument proceeds from premise to con- 
clusion, and from the latter used again as a premise, to 
further assertions quite in the style of David Ricardo. 
Not that the treatment is as bare or rigid on the sur- 
face, but the underlying characteristic is the same. 

Logic was a strong point with Say, as may be further 
seen from his criticism of Smith's definition of production. 
To debar personal services from this class does not seem 
right to Say who argues, a propos of a physician's work : 
This industry, "as well as that of the public functionary, 
the advocate or the judge, which are all of them of the 
same class, satisfies wants of so essential a nature, that 
without those professions no society could exist. Are 
not then the fruits of their labor real? They are, so 
far as to he purchased at the price of other and material 
products which Smith allows to be wealth . . . " ^ [ital- 
ics mine]. Any service from this standpoint represents 
value, from which follows incidentally that the value of 
the use of capital must be distinguished from the efforts 
of the enterpriser who uses capital, ^hus profit and 

* Ibidem, p. xxviii. 
s Ibidem, p. 63. 



UTILITARIANISM 113 

interest are two different things. The entrepreneur view 
overbalances Smith's collectivism, and emphasis is shifted 
from production to distribution. The earlier works of 
Garnier and Sismondi see nothing amiss in this modifica- 
tion, but as is well known, protest grew stronger with 
years. 

Smith and Ricardo. — ^For the time being however the 
field belonged to individualism, thanks first to the 
antecedents upon which Utilitarianism could draw, and 
secondly to the kind of men who continued the labors 
of Smith. It was not an accident that Ricardo's "Prin- 
ciples of Political Economy and Taxation" attained such 
wonderful vogue, nor that from the beginning he ignored 
the foundations of Smith. Smith the Scotchman who 
exchanged Presbyterianism for Deism, and Ricardo the 
Portuguese converted from Judaism to Christianity I 
Morality for the one basic to all social life, and for 
the other a personal item that had nothing to do with the 
problems of science! 

To put the two men, therefore, and the groups of 
thought they represent, into one class is to do violence 
to important facts ; for even though they have much in 
common, on more than one vital point they part com- 
pany. Ricardo frankly admitted this estrangement. He 
was as fearless in criticizing as he was generous in his 
thanks. That Smith had blazed the path which others 
must start with, was never denied. The question was 
merely how far the trail might lead, and where a turn 
should be made. Ricardo by his concise and trenchant 
comment on Smith answered these questions. He caused 
economic thought to move away from the original direc- 
tion. He made it virtually impossible for us to speak of 
a "classical" economics ; for either we mean by it the 
Utilitarian outlook, or we confine it to the Naturalistic 



114 THE DEVELOPMENT OF ECONOMICS 

presentation of Smith and the Physiocrats. In the for- 
mer case the founders are non-classical ; in the latter case 
classicism died almost at birth, as a study at close range 
of the two respective systems will soon convince us. 



TABLE ONE 

CHAB.ACTERISTICS OF SMITHIAX AKD RICARDIAK ECOKOMICS COMPARED 



Smith 

Naturalism 
Theism 

Social Instincts (Sympathy) 

Collectivism 
Progress 

Historical Viewpoint 

Stress on Production and Ex- 
change 

Division of Labor, and Rising Re- 
turns 

Wages pitted against Profits 

Rent as Monopoly, in Price 

Rising (Super-) Wages 

Foreign Trade according to Abso- 
lute Cost Differences 



Ricardo 
Utilitarianism 

Agnosticism 
Hedonism (Associationism) 
Individualism 

Happiness 
Static Viewpoint 
Stress on Price and Distribution 

Sex Instincts, and Falling Re- 
turns 

Wages pitted against Rent 

Rent as Differential, not in Price 

Subsistence Wages 

Foreign Trade according to Rela- 
tive Cost Differences 



The accompanying Table may serve to enlighten us 
on the subject. Naturalism in the hands of Smith, it 
will be noticed, started with theistic beliefs — very definite 
and persuasive ones — and ended with an optimistic ver- 
sion of the wages-problem, if applications to foreign 
trade may for the moment be set aside. By Smith the 
innate goodness of man is appealingly brought forth and 
the power of conscience portrayed. We are told much 
of sympathy and little about selfishness. The weal of 
all is never overlooked. On the contrary the only defi- 
nition for economics ever offered refers to its art-aspects, 
to its principles of policy. The thing finally aimed at 
is social progress, in so far as economic means and meth- 
ods may subserve that end independent of theological or 
moral criteria. 



UTILITARIANISM 115 

Production and exchange therefore are treated largely 
in a non-competitive spirit. The lessons of history are 
invoked to lighten the way of the statesman. He is to 
measure materials and labor-power rather than rights or 
incomes individually computed. Division of labor figures 
as a link in the chain of universal progress. National 
dividends and not personal shares ; returns as consisting 
of stuff, and not of titles to it ; output to be deemed more 
important than the laws of pricing! 

So the "Wealth of Nations'^ implies the existence of 
a super-wage that none can take from labor ; or if a 
conflict is to be thought of, it is between profit and wages 
rather than between landlord and artisan. Rent of 
course is part of price, and if goods fail to enter the 
foreign markets it is not on account of tribute paid to 
land, but because of absolutely higher costs of production, 
the law of self-interest operating under like conditions 
everywhere. 

Ricardo, as we know, preached a less reassuring 
doctrine. To him life was earnest, and the outlook 
gloomy for the masses. Instead of reliance upon the 
deity he professed what amounted to agnosticism. In- 
stead of individualism mitigated by the inherent virtues 
of self-interest he shared the views of Bentham and Mill, 
hedonism being psychologically proven and ethically 
either invalid, or perfect — the latter seeming most 
reasonable. The egotistic bent of man, in other words, 
called for actions which were right, however honest the 
protestations of the injured. Collectivism was out of 
place ; one must keep it out in order to give economics a 
scientific validity. Take the world as it is. Study it at 
a given instant of time. Let that snapshot suffice for 
purposes of research, and the laws you obtain or the ap- 
plications you seek will be worthy of anything done by 



116 THE DEVELOPMENT OF ECONOMICS 

the physicist. Happiness must be sensually measured if 
wants and wealth are to become definite quantities. 
Pleasure and pain, and not progress of which historians 
might sing! Price as the central problem of the econo- 
mist, and income as a share imputed to parties legally 
instrumental in creating products. "The produce of the 
earth ... all that is derived from its surface by the 
united application of labor, machinery, and capital, is 
divided among three classes of the community, namely the 
proprietor of the land, the owner of the stock or capital 
necessary for its cultivation, and the laborers by whose 
industry it is cultivated." ^ A remarkable statement in- 
deed! A notification that must have astonished the 
reader, had he not by other channels been kept constantly 
in touch with the moods of the day. "To determine the 
laws which regulate this distribution is the principal prob- 
lem in political economy" '^ — another departure from the 
accustomed, and one destined to outlive Utilitarianism 
itself. 

Sex instincts and diminishing returns, rents that did 
not enter into price, wages kept low through the laborer's 
own folly, and yet a far-reaching admission (in the dis- 
cussion of foreign trade) as to the limits of mobility for 
labor and capital — these comprise some of the salient 
features in the Ricardian scheme that the eighteenth 
century had led up to as truly as it had molded the creed 
of Smith. It was plain that Laissez Faire after Ricardo 
would mean more than the Physiocrats had intended, and 
that for all the adherence to a Smithian terminology or 
its outward form the contents of economics had to change. 
The fact that Ricardo was a banker by profession fa- 
vored this presumption, but the new economic organiza- 

" Ricardo, D., Principles of Political Economy, Preface. 
' Ibidem. 



UTILITARIANISM llT 

tion developing in England, the advent of machinofac- 
ture and world commerce, as well as the force of certain 
personalities back of economic investigations, furnish the 
final reason. Utilitarianism had too many friends to 
fail of economic expression! 

Utilitarian Economics Defined. — ^What then were the 
main characteristics of Utilitarian economics? The an- 
swer is: A hedonistic psychology, a derivation of group 
incomes from laws of human nature, the measurement 
of prices by objective costs or returns, and the assump- 
tion of certain human instincts as the basis for individ- 
ual freedom in production and exchange. Such were the 
ideas principally exploited by the successors to Adam 
Smith, and it must be borne in mind that Utilitarian 
tenets figure prominently in treatises written even during 
the last few decades, even though on the other hand the 
Marginal viewpoint, which has dominated most economic 
writing since 1890, took root when Utilitarianism was 
still at its height. The two ways of looking at economic 
life and of analyzing price and income overlap, but they 
also share in common a few fundamentals that the Utili- 
tarian economists first gave currency between 1820 and 
1850. 

The legal premises of course were taken over directly 
from Adam Smith and the writings that stimulated his 
thought. What the author of the "Wealth of Nations" 
had taken pains to demonstrate step by step, starting 
out from facts of human nature, and winding up with 
applications to questions of commercial policy, all these 
theorems of Non-interference the Utilitarians adopted 
without further ado. They made an axiom, as they would 
doubtless have admitted, out of the arguments of their 
predecessor. But they also made contributions of their 
own, incorporating into their economics a psychology 



118 THE DEVELOPMENT OF ECONOMICS 

and logic that Smith had treated with indifference. One 
may distinguish therefore the one from the other by re- 
membering that Smith was steeped in theology, in ideal- 
istic ethics and a theory of human progress, while after 
his time description superseded purpose, and a concern 
for profits the notion of social welfare. 

The objective viewpoint governs the analysis of price 
and of shares going to producer-groups, in which re- 
spect Utilitarianism differs notably from Marginal eco- 
nomics; but the subjective approach is presaged by the 
persistent reliance upon states of consciousness and of the 
emotions as a key to personal valuations. Motives become 
very important. Pleasure and pain become words all too 
familiar in the vocabulary of the Ricardians. Rising and 
falling degrees of want for present goods are coupled 
with more or less vivid recollections of former experi- 
ences. Differentials of a psychic sort mingle with those 
esteemed most highly in the determination of values. 
Utilitarianism everywhere fortifies its positions by au- 
thorities in non-economic fields, and what is more, the 
British stamp is never lost, no matter whose work we 
have before us, be he Frenchman or Teuton. An ac- 
quaintance with English and Scotch philosophical and 
psychological thought is valuable precisely because of 
this supremacy of the Utilitarian principle in orthodox 
economics between, say, 1800 and 1870. The dissenters, 
as will soon appear, are not a few in number, nor can 
the merits of the historical movement which steps between 
Utilitarianism and Marginism be easily overrated. Yet 
there remains the paramountcy of the so-called "classical 
economies'* and the conspicuous role played by later neo- 
classicists up to our own day. 

Utilitarian Psychology. — The ideas which Utilitarian 
economics wove into its story were substantially the same 



UTILITARIANISM 119 

that Locke had first submitted to metaphysicians, and 
that Hartley and Hume had further developed for pur- 
poses not by any means economic. By 1750 this sensa- 
tionalistic psychology was already full-blown, but it de- 
volved specially upon James Mill, the father of John 
Stuart Mill, and upon such wellknown thinkers as Alex- 
ander Bain and William Whewell to perpetuate its lead- 
ing doctrines and to provide the data for J. S. Mill, 
the logician and economist, in his attempt at a systematic 
exposition of social science. Thus, through the agency 
of a comparatively few men Utilitarian economics ac- 
quired its premises ; thus the "economic man'' could be- 
come a subject for studies that have preoccupied many 
an industrious scholar. 

So far as the argument for the "economic man" is con- 
cerned it ran somewhat like this. All ideas are derived 
from sensations or from other simpler ideas themselves 
due originally to stimuli from without. Ideas are built 
into complex groups of notions and trains of thought. 
Furthermore, these latter are due to certain principles 
of association which also account for our belief in the 
regular recurrence of events outside. Feelings accom- 
pany ideas, and are transformed into emotions aroused 
either centrally, or directly by objects about us. Reflec- 
tion is a powerful aid in the development of ideas and 
ideals. On reflection the principle of association begins 
to operate, and this applies to the feelings no less than 
to ideas. 

Among the most important ideas are those of pleasure 
and pain, notions which must necessarily accompany the 
great majority of sensations, and from which an infinite 
variety of judgments have sprung that are raw material 
for the would-be moralist. Pain and pleasure, however, 
though not all due directly to sensations, remain always 



120 THE DEVELOPMENT OF ECONOMICS 

quantitative items, that is, they vary in assignable re- 
spects, but because of the materialistic basis of sensa- 
tion cannot contain more than degrees of intensity, dura- 
tion, uniformity, etc., etc. The greater this quantity the 
more powerful the reaction of which we become conscious, 
namely, a desire or aversion to do. Endeavor is the in- 
evitable concomitant of pleasure remembered or admin- 
istered, and this is known to us as a wish or unwilling- 
ness. Pleasure and pain, then, measure desire or aver- 
sion, and vice versa, the intensity of desire being an index 
of the amount of pleasure felt or anticipated as the case 
may be. Now, since pain and pleasure hlend in almost 
all our reactions^ and since on the other hand, ideas are 
governed hy principles of association which group them 
according to experiences in our physical or social en- 
vironmenty it follows that first, economic motives have no 
superior, and secondly, laws of consciousness may he es- 
tablished, some governing the field of economics, and oth- 
ers ruling in other fields. 

Further, as to the role of ethics in economics, suppos- 
ing this question were to be considered at all, we have 
no choice but must identify the good without exception 
with the possession of pleasure or the freedom from pain. 
Utility is something pleasurable, and both are equivalent 
to virtue or happiness. The quantity of pleasure and 
good will vary, but qualitative distinctions are absurd, for 
pleasures are nothing but quantities physiologically trace- 
able if our instruments are delicate enough. Two impor- 
tant facts must, however, be kept in mind with regard 
to this sensational basis of the good; namely, in the 
first place, the laws of association prompt us frequently 
to value things which at first were only means to the 
desired end, the shifting adding greatly to our range of 
desires, and in the second place it is results that count, 



UTILITARIANISM 121 

and not motives. Hence, if we were to take a social view 
of the problem, we might easily show why maximum hap- 
piness of the greatest possible number is the best test 
for morality. In this sense consequently economic and 
ethical facts deal with the same subject, but of course 
there was no reason for bringing in the question of a 
goal, since in a perfectly natural manner men did what 
tended toward the highest good. 

Curiously enough the Utilitarian economists did not 
develop the subjective aspects of pricing, nor as a rule 
preach hedonistic ethics. Instead they dealt with costs 
and demand as objective facts, while on the other hand 
doubting, or renouncing, the moral implications of their 
psychology. Even Hume compromised when it came to 
a decision on this important matter. He declared frankly 
that "the chief springs or actuating principles of the 
human mind are pleasure and pain; and when these 
sensations are removed, both from our thought and feel- 
ing, we are in a great measure incapable of passion or 
action, of desire or volition" ; ^ but nevertheless he identi- 
fied the good mainly with benevolence and sympathy. 
Virtue to him had a social aspect far removed from the 
craving for pleasure. 

However, it is in Hartley, and not in Locke or Hume, 
that hedonism is given its final and most convincing form, 
the hint being taken from John Gray's essay of 1731 ; and 
from now on we find the theory prospering with which 
Bentham is commonly associated, though as a matter 
of fact he added very little of his own. Tucker and 
Paley had anticipated Bentham in the clear formulation 
of a universalistic hedonism. James Mill was chiefly re- 
sponsible for the vogue it obtained in economics. Ben- 
tham himself made it a slogan for reform in politics and 

8 Treatise, Book III, Part III, § 1. 



122 THE DEVELOPMENT OF ECONOMICS 

criminal law, but originality can hardly be credited to 
him. What he contributed was an elaboration rather 
than an initial suggestion, as a study of the litera- 
ture will show. Hartley in 1748 had this to say: 
"Our passions or affections can be no more than aggre- 
gates of simple ideas united by association. They must 
be aggregates of ideas, or traces of the sensible pleas- 
ures and pains which ideas make up by their number and 
mutual influence upon one another." ^ . . . "Since the 
things which we pursue do, when obtained, generally af- 
ford pleasure, and those which we fly from affect us with 
pain if they overtake us, it follows that the gratification 
of the will is generally attended with, or associated with, 
pleasure, the disappointment of it with pain. Hence a 
mere associated pleasure is transferred upon the grati- 
fication of the will, a mere associated pain upon the dis- 
appointment." ^^ Further, "the associated circum- 
stances of the pleasures are many more than the pleas- 
ures themselves. But these circumstances, after a suf- 
ficient association, will be able to excite the motions sub- 
servient to the pleasures, as well as these themselves ; and 
this will greatly augment the methods of obtaining pleas- 
ure." ^^ Finally, "all the pleasures and pains of sensa- 
tion, imagination, ambition, self-interest, sympathy, and 
theopathy [love of God], as far as they are consistent 
with one another and . . . with the course of the world, 
beget in us a moral sense, and lead us to the love and ap- 
probation of virtue, and to the fear, hatred, and abhor- 
rence of vice. . . ." ^^ Thus experience entails "the de- 
duction of all our moral judgments, approbations, and 
disapprobations from association alone." ^^ 

« Observations on Man — , 1748, vol. 1, p. 368. 

10 Ibidem, pp. 368-70. 
"Ibidem, p. 112. 
"Ibidem, p. 497. 
"Ibidem, p. 499, 



UTILITARIANISM 123 

In this way hedonism became scientific, somewhat on 
the principle that Karl Marx sought to give a scientific 
tone to his demand for social reform. The association 
law was used to explain the rise of a desire for pleasure 
even when the thing aimed at did not itself gratify the 
senses.-^* The happiness of men was held to flow from 
their acting on remembrances no less than on stimuli at 
work. Tucker elaborated this idea in 1768 in his "Light 
of Nature Pursued." Qualitative differences between 
pleasures were expressly denied.-^^ The stress was on 
gratification for its own sake, saving only the abstract 
view of happiness for the greatest number. The Baron 
d'Holbach had in 1771 in his "System of Nature" given 
a finished form to this sort of hedonism with the aid of a 
materialistic metaphysics. Like Helvetius and Cabanis 
he had eulogized the perfection of the human mechanism 
which found its end, its pleasures, in the natural unfold- 
ing of its capacities. "The object of all his [man's] 
institutions," he wrote, "of all his reflections, of all his 
knowledge is only to procure that happiness toward which 
he is incessantly impelled by the peculiarity of his na- 
ture." ^^ Man being a purely physical structure all con- 
sciousness is motion, and sensation the root of ideas. 
Truth could not emanate from anything else but a cor- 
rect association of ideas ... as shown by Locke and 
Hume whom d'Holbach followed closely. . . . Happiness, 
therefore, is "the coordination of man with the causes 
that give him impulse" ; ^'^ and "legislation is the art of 
restraining dangerous passions, and of exciting those 
which may be conducive to the public welfare." ^^ 

Considering that this passage antedates Bentham's 

1* See for instance Tucker, A. The Light of Nature Pursued, 1768. 

" Ibidem, Part I, ch. 16, § 1. 

"Vol. 1, ch. 1, transl. by Robinson, H. D., 1836. 

" Ibidem, ch. 9. 

18 Ibidem, ch. 17. 



124 THE DEVELOPMENT OF ECONOMICS 

"Fragment on Government" by five years we must be in- 
terested in it, even though it was Bentham alone who 
influenced the two Mills, father and son. But in- 
deed, Paley in his "Principles of Moral and Political 
Philosophy," 1785, had also expressed himself in words 
reminding one of Bentham. -^^ Not only had the phrase 
"greatest happiness of the greatest number" been coined 
by that time, but the increase of population as a proof 
of quantitatively growing happiness was urged by 
Paley.^^ If, therefore, a wide-awake thinker like Comte 
could write to J. S. Mill in 1841 : Bentham is "the main 
origin of what is called political economy," he must have 
had in mind the general moral effect of Bentham^s dia- 
tribes rather than his psychology. 

Yet Bentham may well be put in a class by himself, for 
no one man reflects more faithfully the temper of Utili- 
tarian economics. In his works a religion is made of what 
Smith considered a misunderstanding of facts. We are 
told in the first paragraph of the "Introduction to the 
Principles of Morals and Legislation," 1789, that "nature 
has placed mankind under the governance of two sover- 
eign masters, pain and pleasure." . . . "They govern us 
in all we do, in all we say, in all we think; every effort 
we can make to throw off our subjection will serve but 
to demonstrate and confirm it." ^^ And so we read in the 
posthumous Deontology: "To obtain the greatest por- 
tion of happiness for himself is the object of every ra- 
tional being. Every man is nearer to himself than he 
can be to any other man; and no other man can weigh 
for him his pains and pleasures." . . . "Dream not that 
men will move their little finger to serve you, unless their 
advantage in so doing be obvious to them." 

" See edition of 1811, Book II, ch. 6, at the beginning. 

20 Ibidem, p. 470. 

" Opening paragraph. 



UTILITARIANISM 125 

In his comment on the "Table of Springs of Action," 
to be sure, four numbers are given over to moral or re- 
ligious motives,^^ sympathy too appearing in the list; 
but at bottom of course there was no need of such dis- 
tinctions, since all pleasures and pains were quantities 
only. In fact, Bentham warns us more than once 
that there are no good or bad pleasures or desires. ^^ 
The idea of a Moral Sense is, partly in this spirit, 
scorned as a child's fancy. Neither natural law nor 
social compact nor intuition have anything to do 
with ethics, nor are they necessary to explain our ac- 
tions. We seek pleasures, and that is the alpha and 
omega of social processes. Aversion, not desire, for in- 
stance, "is the emotion, the only emotion, which labor 
taken by itself is qualified to produce. , . .'* ^^ Eco- 
nomics has to deal with this fundamental in human na- 
ture. It turns on questions of utility and sacrifice as 
our hedonistic bias defines them. "Utility is that prop- 
erty in any object whereby it tends to produce benefit, 
advantage, pleasure, good, or happiness ... or to pre- 
vent . . . pain, evil, or unhappiness to the party whose 
interest is considered." ^^ Desirable results consist of 
such possession of happiness. The results count, not our 
intentions. Action is good or bad, we are told, according 
to the "sum total of its consequences." ^^ 

Bentham, as remarked, found enthusiastic support in 
influential circles. James Mill, well reputed for his 
"History of the East India Company," in 1829 pub- 
lished his still more important "Analysis of the Phenom- 
ena of the Human Mind" on which his son John Stuart 
Mill was brought up, and whose merits impressed men 

" See edition of 1817. 

2» Ibidem, Observations. 

2* Ibidem. 

?5 Principles of Morals and Legislation, ch. 1, § 3» 

" Ibidem. 



126 THE DEVELOPMENT OF ECONOMICS 

like A. Bain and H. Spencer. James Mill goes back 
chiefly to Hartley for his associationism, but he also 
admires Bentham. The whole problem of logic, ethics, 
and education he believes to find a solution in the prin- 
ciples of consciousness as the eighteenth century writers 
in England had described it. All phenomena of thought 
are either intellectual or active. In the former case we 
deal with sensations and ideas ; in the latter with feelings 
and will. But both sets of facts are subject to the laws 
of association, and not merely the former. The old 
philosophy of Locke, Hume, and their epigones is pre- 
sented once more, and the moral sense dismissed as a use- 
less fabrication. The line of division, James Mill in an 
unguarded moment notes, is not between intuitions and 
experiential judgments, but rather between the moral 
and the useful, the first being a human thought, but the 
second a fact inherent in objective conditions. 

Needless to say, this slip means nothing serious. The 
rupture between moralism and hedonism came not in 
James Mill, but in his son, and then only after Utili- 
tarian economics had reached a definite form. Whewell, 
whose "Elements of Morality," 1841, enjoyed popularity, 
and who influenced J. S. Mill through his "History of the 
Inductive Sciences," may have encouraged this departure 
from pure hedonism. On the other hand there is the 
"Autobiography" in which J. S. Mill confesses that as 
early as 1827 he came to believe that true happiness is 
attainable only by *'not making it the direct end." ^'^ 
Since then apparently he became more and more dissatis- 
fied with the Benthamite doctrine, and later tried hard to 
reconcile the old interpretation of the laws of conscious- 
ness and of human nature in general with a milder ethics. 

" Ch. 5. 



UTILITARIANISM 127 

That he failed is a commonplace to students of philosophy 
and ethics, but economists have rarely benefited by it. 
Or to put the matter differently: It has been overlooked 
that Mill in his "Utilitarianism," ^^ planned in the early 
fifties, breaks definitely with a large part of the premises 
underlying his "Principles of Political Economy" written 
between 1845 and 1848. Not only that, but this latter 
work itself is marred by an ethico-historical outlook which, 
however creditable to the man and his broader philosophy, 
made impossible a clean-cut presentation of hedonistic 
economics. We feel too much the force of ideas like 
these: "The firm foundation [of altruism] is that 
of the social feelings of mankind, the desire to be in 
unity with our fellow-creatures, which is already a 
powerful principle in human nature, and happily one 
of those which tend to become stronger . . . from 
the influences of advancing civilization." ^^ Or again : 
The end of happiness is "the highest and most harmoni- 
ous development of his powers to a complete and con- 
sistent whole." ^^ Even then if "will is the child of de- 
sire," ^^ something depends on the kind of desire. Even 
if "the sole evidence it is possible to produce that anything 
is desirable is that people do actually desire it," ^^ yet 
there are desires of various meaning to society. J. S. 
Mill candidly confessed ^^ that Hartley's associationism 
should be used as a key to meliorism, but expected sharp 
discrimination on the part of students between egotistic 
and social values. On the ethical side, therefore, psy- 
chology could not appease the idealistic yearnings of a 

" See his definition of the word in ch. 2. 

=» Ch. 3. 

^° Essay on Liberty. 

'^ Utilitarianism, ch. 4. 

" Ibidem. See also ch. 1. 

3* Mill's Autobiography, ch. 4. 



128 THE DEVELOPMENT OF ECONOMICS 

J. S. Mill, even though as a groundwork for logic and 
methodology he found it most valuable. 

Hence, in passing over to the methodological basis of 
Utilitarian economics we must not associate it too nar- 
rowly with MilFs "Principles of Political Economy." The 
former owes its strength and precision largely to the as- 
sumptions first succinctly stated in Mill's "Logic" (pub- 
lished in 1843; but the "Principles" contain both more 
and less than the "Logic" allowed. It was what J. S. 
Mill tried to prove and do, and not what he succeeded 
in proving or doing, that discloses to us the connection 
between Utilitarian and Naturalistic economics. 

J. S. Mill's Eclecticism. — To go a little further into this 
matter. If one looks for iron consistency in J. S. Mill 
one is certain to be disappointed, for a mind filled with 
as many divergent views as Mill's, and as sympathetic 
toward the old and the new in all fields of scientific or so- 
cial endeavor, was not likely to concentrate upon one 
single system of thought. The title of his treatise on 
economics is itself symptomatic of the position in which 
he found himself as student and citizen. He discusses 
"Principles of Political Economy with Some of Their Ap- 
plications to Social Philosophy." He combines in it the 
views of Ricardo and Senior, Malthus and James Mill 
his father, Th. Chalmers and John Rae, Adam Smith 
and R. Jones. He is not unmindful of the advice given 
by men like Th. B. Macaulay, or by A. Comte, the 
creator of a Positive Philosophy. He shows historical 
leanings even while emphasizing the static premises 
underlying Utilitarian economics. He knows the eight- 
eenth century philosophers and writes brilliantly on 
Sir William Hamilton and Whewell. He follows with 
interest the communistic theories on the continent and 
takes up the cause of political democracy. Intuitionism 



UTILITARIANISM 129 

and undiluted hedonism both leave their impress on his 
theory of the Good. He gives us "A System of Logic, 
Ratiocinative and Inductive" when little over thirty years 
of age, and many years later his maturest thoughts on 
"Liberty" and "The Subjection of Women." 

He is an empiricist who, on the whole, agrees with 
the phenomenalism of David Hume. Agnosticism grows 
on him even while he wishes for a divine justice. Statics 
and dynamics, the Laissez Faire of Smith and scien- 
tific paternalism, hedonism and eudaemonism, — these 
and other differences are considered and given a re- 
spectful hearing. No wonder that his "Logic" preaches 
what the "Principles of Political Economy" did not 
apply. No wonder that breadth entails a scattering of 
ideas, and Mill the man is greater even than Mill the 
thinker. No mortal could sum up so much of the creeds 
and interests of his day without sacrificing something of 
the inner unity of argument. Mill stands out as the 
culminating figure in Utilitarian economics, but one must 
judge him by his premises and ideals rather than by spe- 
cific contributions made to the subject. 

Or rather, it seems better to view his economic treatise 
as a minor work, which cannot yield the full measure of 
its wisdom without being read in the light of his earlier 
thought. It is the philosopher that speaks in the "Prin- 
ciples" even more than the economist. It is from the 
standpoint of an eclectic who seeks to reconcile diverse 
beliefs that he made bold to restate what he deemed fun- 
damental to social science and durable in Smith's "Wealth 
of Nations." His ethology saw no development. His 
methods were those of a speculator in ultimate values. 
His utilitarianism broke down as he himself practically 
confessed. But as the archtype of Utilitarian economics 
in the narrow sense he was enabled to give to the world 



130 THE DEVELOPMENT OF ECONOMICS 

everything essential. We cannot do better than study 
J. S. Mill, even if he wrote retrospectively for the most 
part, and not prospectively. 

J. S. Mill's Methodology. — Indeed, this preeminence of 
Mill the economist will be granted the less reluctantly 
since his methodology is incomparably the most com- 
plete in economic literature. The eighteenth century 
thinkers in England had, as shown, attempted to base 
sociology upon an analysis of human nature; but the 
recondite problem of the method and delimitation of so- 
cial science they hardly touched. There are no logicians 
for us to consult on this point. Neither Hobbes, Locke, 
nor Hume had gone beyond the generalities of social logic. 
The Moralists — excepting Hartley and Ferguson — had 
not even suggestions to make. Realists like Th. Reid, 
D. Stewart, and Sir W. Hamilton continued to empha- 
size problems of epistemology.^* The prevailing view- 
point was the empirical, although of course tinged phe- 
nomenalistically in Hume's style; but the theory and 
history of Induction had not yet found a worthy ex- 
pounder. Even thinkers like Th. Brown, the author of 
the "Lectures on the Philosophy of the Human Mind," 
published in 1820, and J. F. W. Herschel whose "Pre- 
liminary Discourse on the Study of Natural Philoso- 
phy" (1831) ^^ was not without influence on his genera- 
tion, contributed little to the topic that J. S. Mill made 
his own by one single stroke, in the publication of his 
"System of Logic, Ratiocinative and Inductive" in 1843. 

It is here that we find heaped up in one volume all the 
elements that were useful in the formal development of 

" Whewell's (W.) works, though important for Mill's treatment of 
logic, did not deal with methods in social science. For Stewart (D.) on 
causation see his Elements of the Philosophy of the Human Mind, Part 
II, ch. 2. . . , X 

" See his remarks on law and cause in the original edition, vol. I, 
p. 85, etc. 



UTILITARIANISM 131 

economics as a science. On the psychological side these 
factors were the acceptance of human nature as the key 
to social processes and to economics in particular; the 
rejection of free-will — as formerly understood — and the 
establishment of a causal nexus between all states and 
actions of consciousness ; the derivation of ideas from 
impressions, the dualism of Mind-Matter being implied 
though not openly acknowledged; the stress on associa- 
tion principles and on the transfer of desire from an 
original end to means for securing it ; and not least of 
all the supremacy of the pain-pleasure calculus. But 
on the logical side we have also to note as important: 
the sharp differentiation between induction and deduc- 
tion; the reliance upon Newtonian forces as a model for 
psychic forces which, within the social process, gave rise 
to either a composition or a chemical reaction of elements. 
And then again there was the addition of a dynamic to 
the static concept, methods of proof being adapted to 
both, according to viewpoint or materials studied by 
the economist. 

The earlier part of Mill's "Logic" ^^ contains much 
of significance for his sixth Book in which social science 
is given its methodology. It is on the ground of Mill's 
definition of "Cause," and of the difference between me- 
chanical and chemical interrelations of events that eco- 
nomics is eventually recommended to a deductive method, 
the reservations to the contrary being of a minor sort. 

Cause is defined as "the sum total of the conditions, 
positive and negative, taken together; the whole of the 
contingencies of every description, which being realized, 
the consequent invariably follows." ^^ But early in his 
treatise Mill points out the decisive difference between 

" The edition here used is that of Harper Bros., New York, 1874. 
" Book III, ch. 5, § 3. 



132 THE DEVELOPMENT OF ECONOMICS 

a case where several causes act merely by way of sum- 
mation, and another in which the effect is quite unlike 
the causes, as for instance in a compound built chem- 
ically out of its elements. The recognition of this dif- 
ference Mill records in his "Autobiography" as a 
memorable moment in his life. He says: "I now 
[that is shortly before 1830 probably] saw that a sci- 
ence is either deductive or experimental according as, in 
the province it deals with, the effects of causes when con- 
joined are or are not the sums of the effects which the 
same causes produce when separate. It followed that 
politics must be a deductive science." ^^ And again in 
his "Logic": This also "explains why mechanics is a 
deductive or demonstrative science, and chemistry not. 
In the one we can compute the effects of all combinations 
of causes, whether real or hypothetical, from the laws 
which we know to govern those causes when acting sepa- 
rately ; because they continue to observe the same laws 
when in combination, which they observe when separate. 
Whatever would have happened in consequence of each 
cause taken by itself, happens when they are together, 
and we have only to cast up the results. Not so in the 
phenomena which are the peculiar subject of the science 
of chemistry. There, most of the uniformities to which 
the causes conformed when separate, cease altogether 
when they are conjoined; and we are not, at least in the 
present state of our knowledge, able to foresee what re- 
sult will follow from any new combination, until we have 
tried it by specific experiment.^' ^^ The first is an in- 
stance of the Composition of Causes ; ^^ the last one of 
chemical action. 

Nonetheless, Mill admits that in either case the law of 

"Page 160. 

3" Book III, ch. 6, § 1. 

*" Ibidem. 



UTILITARIANISM 133 

plurality of causes is important, meaning that while a 
cause may be regularly followed by the same result, yet 
this effect may be due to more than any one given cause. *^ 
Hence, while Mill's underlying thought is really a quanti- 
tative measurement of events in the spirit that physicists 
measured mass and force, social events become perplexing 
through the intricacy of causal relations, and through 
an Intermixture of Effects that the natural scientist is 
scarcely aware of. In short, the fact that social students 
can aim only at tendencies in the long run,*^ not at exact 
magnitudes for a particular series, is explainable through 
this interweaving of countless events whose numbers may 
never be determinable. So the Canons of Induction find 
a limit, to say nothing of other objections. 

Now, this analysis of the causal nexus proved momen- 
tous for the working out of economic methodology, not 
merely in Mill's work, but in the subsequent inquiries which 
after all did not go much beyond Mill. 

But we must first look at the psychological substratum 
on which the classic doctrine was erected. Namely, the 
application of Mill's inductive logic to social science, 
though ever kept in mind, and perhaps the occasion for 
the inductive teachings in general, came only through 
eighteenth century sensationalism, whose essentials Mill 
had mastered early in life. 

At the outset the doctrine of free-will is abandoned as 
untenable in the light of associational psychology.*^ 
It is shown that mental states follow a set of laws as 
genuine as the Newtonian. Motives are held to proceed 
from ideas, and these from impressions whose intercon- 
nections obey certain well known laws of association (of 
resemblance, continuity, and contiguity). The teleologi- 

« Book III, ch. 10, § 5. 

** Ibidem. 

« Book VI, ch. 2, § 3. 



134 THE DEVELOPMENT OF ECONOMICS 

cal notion of theologians does not stand an acid test ; of 
that Mill is convinced. Causation rules universally; the 
purposive view of human actions is simply one way of look- 



Chart Three — The Sources of J. S. Mill's Psychology 
Hobbes, Th. Newton, I. Locke, J. 




Hume, D. 



Mill. Jas. 



Mill, J.S. 



ing at a situation whose final meaning the moralist will 
never grasp. 

Hence too the way to economics lies through psychol- 
ogy, ethology, and sociology, the first giving cues to all 
the rest. 

Mill in this matter departed not at all from his prede- 



UTILITARIANISM 135 

cessors. He built on Hobbes — indirectly and to a degree 
— on Locke, Hartley, Hume, and his father, Jas. Mill. 
Tucker and Priestley were intermediaries in that they 
popularized the general argument, and Newton supplied 
a simile that for Hartley no doubt had a deeper import. 
So the line of descent of J. S. MilFs psychology is 
approximately as given in Chart III. 

Newton's theory of vibrations was used by Hartley 
in his "Observations on Man, His Frame, His Duty and 
His Expectations," 1748, to provide a materialistic set- 
ting for his view of sensations. What Locke had said 
earlier on sensations and ideas served to confirm Mill, 
especially after due regard for the later improvements 
of Hume and Jas. Mill. The scheme was simple enough, 
and well epitomized in J. S. Mill's classification of all 
mental facts under the heading: Sensations, Thoughts, 
Emotions, and Volitions.^* From the first were derived 
the remainder. Impressions, through the senses, made 
possible ideas, both the simple and the complex, the latter 
being constructed out of the simple ones in the way that 
blocks produce a mosaic.*^ In Priestley's words: "The 
simple ideas of sensation run into clusters and combina- 
tions by association; and each of these will, at last, 
coalesce into one complex idea by the approach and com- 
mixture of the several compounding parts. ^^ All of 
which Jas. Mill expressed in the sentence: "Brick is 
one complex idea ; mortar is another complex idea ; these 
ideas, with ideas of position and quantity, compose my 
idea of a wall." ^"^ (Behold the birth of concepts!) 

The supreme mental laws then were memory and asso- 
ciation, although the author of the "Logic" described 

"Ibidem, ch. 4, § 1. 

« For some reservations Mill makes on this point see ch. 4, § 3. 

" Hartley's Theory of the Human Mind, edit, of 1790, vol. I, p. 18. 

« Analysis of the Human Mind, edit, of 1869, vol. I, ch. 3. 



136 THE DEVELOPMENT OF ECONOMICS 

them in different words. ^^ Among the universal human 
traits that gave a soHd basis to sociological ambitions 
were these two : Our faculty to remember, ideas being 
compounded and recompounded out of simpler ingredi- 
ents, and the comprehensive law of association which 
governed not only ideas, but also feelings,^^ as Th. 
Brown had been the first to suspect. Thanks to such 
principles there arose uniformities of succession of 
"states of mind." ^^ Ideas were the fountain of all social 
happenings. Regularities in history, as well as our hopes 
for a law of progress, had to be traced back to the afore- 
said fundamentals. (Note then, incidentally, how far 
Mill, the friend of socialism and the master mind of classic 
economics, was from an Economic Interpretation of 
History in the manner of Karl Marx!) 

Now, on the strength of such laws Mill sketched out an 
Ethology ^^ that might yield laws of the formation of 
human character such as Hume had aspired to but had 
failed to locate. It was remarked even here that deduc- 
tion must guide the inquirer, because of the multiplicity 
of data and the composition of causes constituting the 
warp and woof of these moral-psychological events. 

However, what Mill is driving at is of course not merely 
this science of ethics, but rather a methodology for all 
social searchings, and for economics more especially. So 
we are told first that sociology springs from psychology,^^ 
and that, while the number of events to be related is 
virtually indeterminate, and certainly not reproducible 
at will,^^ yet the mode of causal relation is a mechanical 

«Ch. 4, § 3. 

" Ibidem, 

»« Ibidem, § 2. 

« Ch. 5. 

»=» Ch. 6, § 2, and ch. 10. 

«' Book III, ch. 10, § 8. 



UTILITARIANISM 137 

one, as mentioned before under the caption Composition 
of Causes.^* 

It is a cardinal point for our understanding of Mill's 
methodology, that he identified social causation with a 
law of the composition of causes, not with chemical inter- 
actions. What he had come to believe about 1830 he now 
reaffirms. He writes : "In social phenomena the Com- 
position of Causes is the universg-1 law." ^^ . . . ^'Hom- 
ever complex the phenomena, all their sequences and 
coexistences result from the laws of the separate elements. 
The effect which is produced, in social phenomena, by any 
complex set of circumstances, amounts precisely to the 
sum of the effects of the circumstances t alien singly: and 
the complexity does not arise from the number of the 
laws themselves, which is not remarkably great; but from 
the extraordinary number and variety of the data of 
elements. . . ." ^^ 

Because of this fact Mill pronounces social science to 
be a field for direct deduction, adding merely : "not indeed 
after the model of geometry, but after that of the higher 
physical sciences. It [social science] infers the law of 
each effect from the laws of causation upon which that 
effect depends, — by considering all the causes which con- 
junctly influence the effect, and compounding their laws 
with one another." ^"^ This is the Concrete Deductive 
Method; and nothing short of stupidity would urge 
induction for this purpose. "The vulgar notion that the 
safe methods on political subjects are those of Baconian 
induction, that the true guide is not general reasoning, 
but specific experience, will one day be quoted as among 

5* Ibidem, ch. 7, § 1. 
55 Book VI, ch. 7, § 1. 
5« Ch. 9, § 1. 
" Ibidem. 



138 THE DEVELOPMENT OF ECONOMICS 

the most unequivocal marks of a low state of the specu- 
lative faculties in any age in which it is accredited." ^^ 

Only two admissions are granted by way of amplifi- 
cation. Namely, the premises of social science will have 
to be estabhshed chiefly inductively,^^ albeit thereafter 
everything is deduction; and secondly, on account of the 
Intermixture of Effects the student of economics cannot 
expect to formulate rigid laws by precise measurements. 
No, he can deal only with tendencies or averages,^*' though 
this is not detracting from the merit of his work, or from 
the potency of economic principles. At any given 
moment, that is to say from a static standpoint, events 
will shape themselves in obedience to the laws of mind and 
of the composition of causes. Long-run effects will be 
ascertained beyond cavil. Though relative to place and 
periods, social laws will have wide prevalence. Deduction 
will cover all needs provided we do not attribute every 
situation or sequence to a single motive as Bentham 
demanded to suit his hedonistic program. With a side- 
long glance of scorn at this Benthamite "geometrical" 
method ^^ Mill continued his argument, clinching it with 
two points that, although not vital, deserve mention by 
way of closing our account. 

In the first place Mill came under the influence of 
A. Comte, as has been shown by a host of investigators 
from various angles. To Mill's thinking Comte con- 
tributed the historical viewpoint. This Mill had hereto- 
fore not reckoned with, or at any rate not sufficiently 
considered in his methodology. It must have been a 
perturbing item, since economics so far had adhered 

88 Book III, ch. 10, § 8. 
"Book VI, ch. 4. 
"o Ch. 9, § 1. 
" Ch. 8. 



UTILITARIANISM 139 

rigidly to a static view, excepting only some heterodox, 
practically unknown, writings of a collectivlstic hue. 

How was Mill to find use for this vista that revealed 
mankind as a troop traveling at slow gait over long dis- 
tances of time, changing its route, inconstant In its pro- 
fessions of faith, and harassed more by its own institu- 
tional creations than by obstacles of nature? 

Whatever Comte's shortcomings as a logician and 
metaphysician, it was plain to Mill that another avenue 
of approach to social valuations had been opened, and 
that the simplicity of Humlan psychology had to be sup- 
plemented by studies for which deduction could not serve. 
Comte alone, we are told, "has seen the necessity of thus 
connecting all our generalizations from history with the 
laws of human nature ; and he alone therefore has arrived 
at any results truly scientific. . . ." ^^ A method 
ancIUarj^ to the deductive is consequently in order; and 
"this method, which is now generally adopted by the most 
advanced thinkers on the continent, and especially in 
France, consists in attempting, by a study and analysis 
of the general facts of history, to discover . . . the law 
of progress. . . ." ^^ Given certain laws of mind and of 
behavior, what has history to say by way of corrobora- 
tion or refutation, this is the question. Deduction and 
induction will work together to supply the answer. An 
Inverse Deductive Method thus results, and sociology 
becomes a philosophy of history that discloses the 
"empirical laws of society," connecting them "with the 
laws of human nature by deductions showing that such 
were the derivative laws naturally to be expected as the 
consequences of those ultimate laws." ^^ 

Whether this is a successful manner of linking statics 

«2 Ch. 10, § 3. 
^^ Ibidem. 
«* Ibidem, § 4. 



140 THE DEVELOPMENT OF ECONOMICS 

and dynamics need not now engross us, but assuredly its 
effect upon Mill's "Principles of Political Economy" were 
not negligible.^ ^ On the other hand, it is equally certain 
that the second of the two qualifications of the deductive 
method urged by Mill follows much more naturally from 
his conception of mental phenomena ; to-wit. Mill's empha- 
sis upon economics as a separate science, basing deduction 
on a relatively small number of elements of hum:.n nature, 
which as premises must either be accepted or render null 
and void all subsequent conclusions. ^^ 

Different social facts were acknowledged to spring from 
different classes of causes that could be treated sepa- 
rately precisely because of the laws of memory and of 
association. For the economic motives were so all- 
powerful, and the transfer of desire from ends to means 
essential to their realization was so incontestable, that 
economics attained thereby a distinct significance, not 
to say scope and subject matter. "Different species of 
social facts are in the main dependent, immediately and 
in the first resort, upon different kinds of causes; and 
therefore not only may with advantage, but must be 
studied apart. . . ." ^"^ Thus by reasoning from one 
law of nature "a science is constructed which has received 
the name of political economy." ^^ . . . "It makes 
entire abstraction of every other human passion or 
motive except those which may be regarded as perpetu- 
ally antagonizing principles to the desire of wealth, 
namely aversion to labor and desire of the present enjoy- 
ment of costly indulgences." ^^ . . . "The political econ- 
omist inquires what are the actions which would be pro- 
duced by this desire, if within the departments in question 

«5 Book IV is the by-product of this study of Comte. 
«6Ch. 4 of Logic. 
«^ Ch. 9, § 3. 
68 Ibidem. 
6« Ibidem. 



UTILITARIANISM 141 

it were unimpeded by any other. In this way a nearer 
approximation is obtained, than would otherwise be prac- 
ticable, to the real order of human affairs in those 
departments." '^^ Owing to the fact that "the mode of 
production of all social phenomena is one great case of 
Intermixture of Laws" "^^ economic laws will then repre- 
sent long-run tendencies. 

With this understanding the economist may lay claim 
to scientific formulae no less than a physicist. Indeed — 
and casually speaking — ^he need not even insist upon the 
egotistic presuppositions which seem to inhere in his 
premises, for as stated earlier: Desire will reach also 
for things non-economic, owing to the law of transfer 
of interest by association. Or in the words of Mill: 
"It is at least certain that we gradually, through the 
influence of association, come to desire the means without 
thinking of the end. ... As we proceed in the formation 
of habits, and become accustomed to will a particular act 
or a particular course of conduct because it is pleasurable, 
we at last continue to will it whether it is pleasurable or 
not." "^^ For this reason regularity of conduct is possible 
and economic analysis made less risky, while on the other 
hand habit or custom loom up as interferences with the 
rational play of demand and supply. 

Mill, it will be seen, labored cautiously in constructing 
his logic of economics. "^^ He went step by step from 
premises to conclusions, and to further conclusions, inter- 
lacing his argument at points with enough shrewd and 
convincing observations from common experience to be 
sure of a sympathetic hearing. Logically viewed his 

^0 1"5idem. 

71 Ibidem, § 2. 

" Ch. 2, § 4. 

" For an illuminating discussion of the genesis of Mill's Logic see 
Patten, S. N., in his Development of English Thought, 1899, in which 
emphasis is put, however, on somewhat different points. See especially 
pages 324-335. 



142 THE DEVELOPMENT OF ECONOMICS 

treatise is the prerequisite, whether frankly espoused or 
not, of all Utilitarian and Marginal economics. By some 
the superlative value of the "Logic" was overlooked. 
Others prefaced their economics with thoughts along 
similar lines, though much more perfunctorily, and a few 
were doubtless aware of everything implied in this mighty 
essay on social methodology. From the historical stand- 
point Mill furnished a climax almost too grand to be fully 
understood, while to philosophers the best is of course 
not in Book Six of the "Logic," but in the Canons of 
Induction upon which Mill staked his reputation as 
logician. At all events. Mill alone succeeded in framing 
a sequence of thought that justified everything committed 
or omitted by orthodox economists. 

This giant, who encompassed the knowledge of his day 
as few ever have, also conquered unassisted the difficulties 
that Hume had once before perceived, that economists of 
the nineteenth were bound to respect, and which the 
twentieth century may perhaps again scrutinize, if not 
to solve them anew, certainly to appreciate what they 
mean for the future of economics. 



CHAPTER FIVE 
UTILITARIANISM (Continued) 

II. pRINCIPIiES 

The Supremacy of Mill's Logic. — On the foundations 
laid by the Benthamists, and by John Stuart Mill in his 
several philosophical and economic works, economics grew 
into a full-fledged science, functioning independently of 
other social inquiries and for a long time undisturbed by 
any protests from outside. Nothing particularly new 
was added in matters of psychology or methodology. 
At times the premises were restated and amplifications 
offered that helped to remind economists of the broader 
aspects of their discipline; but none of these discussions 
exerted any marked influence. In the United States 
H. C. Carey was the first to unite with a general knowl- 
edge of natural science a deep interest in philosophy, 
as well as originality in the treatment of economic prob- 
lems. No American of the nineteenth century can claim 
more justly our high regard for labors well done than this 
zealous champion of monism. Scattered through his 
many volumes we find ideas on metaphysics, psychology, 
mathematics, physics and chemistry, biology and anat- 
omy, ethics and logic, sociology and history, in the light 
of which his economic views should be read if we wish 
to comprehend him thoroughly. What Comte was to 
France and J. S. Mill to England, Carey in a way meant 
to America. He did not despise methodology even though 

143 



144 THE DEVELOPMENT OF ECONOMICS 

he dealt with it perfunctorily. Like Smith he learned 
much from his own peculiar environment, but there was 
something to start with that was independent of sur- 
roundings, nay even perhaps at variance with them. 

In France and Germany economics underwent material 
changes which will soon have to be noted, but so far as 
the groundwork of its orthodox literature is concerned it 
was either of English design, or else hardly in evidence. 
Only after the rise of the German Empire do we find 
the methodological introductions which have since become 
so familiar, and then they are devoid of distinct merits. 
What the Germans added on this topic belongs either to 
Historism or to Marginism. For the rest, the develop- 
ments pertain to principles, and not to premises. 

Neither can anything more complimentary be said of 
French or Italian economics, until we reach the period 
of Marginism. Indeed, in England, too. Mill occupies a 
unique position, since no student of economic methodology 
ever approached the profundity of his own analysis or 
the thoroughness of his treatment. Characteristic enough 
that neither Malthus nor Ricardo nor Senior concerned 
themselves seriously with the presuppositions of their 
science, and that later writers either restated the bulk 
of Mill's argument — in so far as the problem was appre- 
ciated at all — or else took to the Historical viewpoint, 
whose logic certainly was not that of the Utilitarians ! 
Bagehot has secured for himself an honorable place in 
the field, but did not complete his investigations. Henry 
Sidgwick, like Fawcett and Cairnes, gave prestige to the 
theory of economics, but apparently used his originality 
chiefly for the "Methods of Ethics," Utilitarianism as 
mere ethics being weighed again and found wanting. 
Macleod adds nothing new, nor can it be said of Cairnes* 
"Character and Logical Method of Political Economy" 



UTILITARIANISM 145 

that an advance was made over the position of J. S. Mill. 
In fact, from the very nature of those lectures we might 
perhaps expect them to be general and fragmentary 
rather than exhaustive. Still later comes Marshall and 
Keynes, whose "Scope and Method of Political Economy," 
1891, went more carefully into methodological questions 
than any work except Mill's. Yet in both these cases our 
admiration will be mingled with regret, for again the new 
is either lacking entirely, as in Marshall, or it relates 
simply to such discussions as had been raised by Histor- 
ism and settled there with even greater success. Broadly 
speaking then Mill's "Logic" has neither peer nor suc- 
cessor in point of development within Utilitarian eco- 
nomics. Progress was made in details of doctrine, i. e., 
principles, but not in matters of logic where the premises 
were most naturally put to a test. 

The Field of Economics. — Turning now to these leading 
principles which directly or indirectly were based on the 
premises so far considered. 

To begin with. Utilitarian economics almost from the 
start restricted its investigations to the facts of exchange, 
i. e., monetary measurements. The psychology and logic 
used did not, in fact, leave any choice, though inconsist- 
ently an objection was raised by some writers. Mill had 
shown why economic motives might, be set aside as raw 
material for a new science of which Adam Smith was not 
altogether certain. The Benthamites had spread the 
gospel of hedonism as a key to production and pricing. 
Price was already understood to represent a ratio of 
exchange without which neither income could be explained 
nor the identity of physical and social laws of nature 
be adequately proven. If Mill was right, clearly eco- 
nomics was a science of exchanges ; and so Archbishop 
Whately declared ere long. 



146 THE DEVELOPMENT OF ECONOMICS 

The agreement was pretty general, as may be judged 
from a few quotations. Jennings, e. g., who is anything 
but a docile mouthpiece for other people's opinion, admits 
that economics deals simply with "relations of human 
nature and exchangeable objects. . . ." -^ McCuUoch, 
J. R., in his "Principles of Political Economy,'* 1825, 
writes : "Nothing which is not possessed of exchangeable 
value, or which will not be received as an equivalent for 
something else which it has taken some labor to produce 
or obtain can ever properly be brought within the scope 
of political economy." ^ Similarly Cairnes in his "Logical 
Method," ^ cited before, and the continental writers 
including some with a penchant for historical interpre- 
tations. Wagner, for instance, defines economy (Wirt- 
schaft) as the "study of labor-activities aiming at a 
continuous supply and use of goods for consumption, 
these activities proceeding methodically to that end 
within a closed or at any rate hypothetic ally closed field 
of human wants and gratifications." * So also French 
economists when not avowedly solidaristic in their out- 
look. Or if we care, we can go back to Ricardo's 
"Principles of Political Economy," to Senior and 
Torrens and Jas. Mill, or consider the indirect evidence 
in treatises emphasizing price and income. J. S. Mill 
himself says in his "Principles," 1848: "Things for which 
nothing could be obtained in exchange, however useful 
or necessary they may be, are not wealth in the sense in 
which the term is used in Political Economy." ^ 

Specific Premises. — In keeping with this sentiment was 

1 Jennings, R. The Natural Elements of Political Economy, p. 63. 

2 Pages 10-17. 

3 Page 26. See also pp. 34-37. 

* Lehr- und Handbuch der Politischen Okonomie, vol, 1 ; Grundlegung 
der Volkswirtschaft, 3. edit., 1892, p. 81. See also Schoenberg, G., Hand- 
buch der Politischen okonomie, edit, of 1890, vol. 1, p. 9. 

» Page 24. See also Leroy Beaulieu, P., Traits Th^oretique et Pratique 
d'Economie Politique, 4. edit., vol. 1, p. 18. 



UTILITARIANISM 147 

the assumption by the great majority of writers of cer- 
tain facts, legal or psychological in a narrower sense, 
the denial of which would invalidate the various doctrines 
on price, distribution, and production. The two sets of 
premises were commonly kept together, even though 
logically it had no warrant. Thus, while Smith had 
gone out of his way to justify Laissez Faire, using psy- 
chology and theology for that purpose, the trend of 
legislation was such that, as most men saw it, the unre- 
stricted right of property and contract needed no men- 
tion, while with others nothing seemed less self-evident 
than the free-trade axiom derived from it. Senior, for 
instance, thought the legal rights "assumed in almost 
every process of economic reasoning" as a "cornerstone 
of . . . exchange";^ but Cairnes in his "Essays on 
Political Economy," 1873, declared: "The maxim of 
Laissez Faire has no scientific basis whatever, but is at 
best a mere handy rule of practice useful perhaps, — but 
totally destitute of all scientific authority." '^ In the 
face of such an utterance, even allowing for the occasion 
on which it was made, it would be over-dogmatic to 
declare the hedonistic and legal premises developed during 
the end of the eighteenth century as inseparable and inter- 
dependent, and yet, in spite of the growing resort to cen- 
tral governments for the regulation of economic affairs, 
there can be no doubt of the logical importance of both 
kinds of suppositions. 

Indeed, it was never lost sight of entirely by those 
most consistent in their thinking. Even when not prone 
to theorizing on methods, economists made it their busi- 
ness to remind us, from time to time, of what was basic 
to their argument. Thus to illustrate from only a few 

" Political Economy, Introduction. 

^ Essays in Political Economy, 1873, p. 244. 



148 THE DEVELOPMENT OF ECONOMICS 

authorities: Senior in his article contributed to the 
Encyclopedia Metropolitana, 1836, considered the "ele- 
mentary propositions" on which his science rested to be, 
first, the desire for maximum wealth to be procured by a 
minimum of sacrifice; second, a population limited only 
by moral or physical evils, or by the fear of a want of 
necessities ; third, the ability of the agents of production 
to increase their powers indefinitely by using their prod- 
ucts for further production; and fourth, the law of 
diminishing returns in agriculture. John Stuart Mill 
expressed himself with sufficient clearness on the matter 
both in his "Principles," where older ideas are sometimes 
restated, and in his "Logic," whose general argument has 
already been presented. But perhaps one might add here 
this one sentence: "The psychological law mainly con- 
cerned [in economics] is the familiar one that a greater 
gain is preferred to a smaller one." . . . "By reasoning 
from that one law of human nature ... a science may 
be constructed which has received the name of political 
economy." ^ 

Cairnes believed that "our premises in economics come 
either directly from our consciousness or from physical 
facts easily ascertainable."^ He mentioned the desire 
for wealth, the aversion to labor, the principle of maxi- 
mum gain at minimum cost, a rational mind fit to judge 
upon the proper relation of means to ends, a few pro- 
pensities basic to any law of population, physical quali- 
ties of the soil, and other physical factors as leading ex- 
amples of economic premises. ^^ That is, they appeared 
to be partly logical devices, and partly data that might 
figure as conclusions after an investigation of the respec- 
tive facts had been completed. 

8 Logic, Book III, ch. 9, § 3. 

« Character and Logical Method of Political Economy, p. 220. 

10 Ibidem, pp. 33-4. 



UTILITARIANISM 149 

In the United States Francis Bowen, the author of 
"Principles of Political Economy," 1859, whose readable 
style and broad sympathies with practical questions gave 
him a good name, expressed the view : "Political economy 
begins with the supposition that man is disposed to 
accumulate wealth beyond what is necessary for the 
immediate gratification of his wants, and that this dis- 
position, in the great majority of cases, is unbounded; 
that man's inclination to labor is mainly controlled by 
this desire ; and that he is constantly competing with his 
fellows in this attempt to gain wealth; and that he is 
sagacious enough to see what branches of industry are 
most profitable, and eager enough to engage in them, so 
that competition regularly tends to bring wages, profits, 
and prices to a level." ^^ A similar, but more concise, 
statement came from Newcomb in 1885, at the beginning 
of his ^'Principles of Political Economy," a work of 
unusual merit indeed. We are told there that the funda- 
mental hypotheses were: "That man is a being moved to 
action by an unlimited series of desires ; that these desires 
can be partially satisfied by the exertion of those facul- 
ties bodily and mental, with which the Creator has 
endowed him; that he is a reasonable being capable of 
adapting means to ends ; and that in consequence of being 
a reasonable being he will exert his faculties in such a 
way as to secure the maximum gratification of desires with 
the minimum of inconvenience under the circumstances in 
which he is actually placed." ^^ 

For Cossa, the Italian economist, the premises were 
first, the principle of greatest gain for the smallest cost ; 
secondly, the law of diminishing returns; third, the 

" Page 3. 
" Page 23. 



150 THE DEVELOPMENT OF ECONOMICS 

Malthusian law, and fourth, competition based on private 
property and freedom of contract.^^ 

Among the Germans Wagner wrote in his "Principles 
of Political Economy," 1892, that everything hinged on 
the principles of maximum gain and minimum cost, of 
equal technical or other knowledge pertaining to the 
supply and demand of goods, and on a certain distribu- 
tion of legal rights for using our instincts and reason.^* 
Dietzel, his collaborator in the companion volume on 
"Theoretical Social Economics," 1892, conceded that 
economics could not be a science if certain premises were 
removed, and forthwith grouped them under two head- 
ings, viz., the first as psychological in their nature, the 
maxim of an "economic man," of least cost, and of equal 
knowledge about the facts of the markets being instances ; 
and secondly, those sociological in nature, the choice 
between a coUectivistic or an individualistic order of 
society standing out as all-important. His second class 
of premises therefore became admittedly mere working 
devices, ceased to be what they had been for the older 
Utilitarians, and indicated interestingly the Historical 
leaning which motivated so many Socialists of the Chair. -^^ 

The tentative value of premises, lastly, was also recog- 
nized by philosophers who as logicians had a peculiar 
interest in them. And so it will not be amiss to cite 
Wundt whose "Logic" dealt passim with necessary 
assumptions. They were held to be: Maximum eon- 
sumption, respectively, production as the highest aim of 
men ; equal understanding among men of what was best for 
them, or at Jeast of the means for gratification ; and free- 
trade "in the absence of economic privileges." ^^ Con- 

" Cossa, L. Introduction to the Study of Political Economy (transL 
from the Italian by Dyer, L., 1893), pp. 74-5. 

" Lehr- und Handbuch, vol. I, 3. edit., pp. 175-85. 
" Theoretische Sozialokonomik, 1895, pp. 78-92. 
"Logik, 2. edit., vol. 2, p. 509. 



UTILITARIANISM 151 

sidering the reputation of the author, and the place 
of this statement (namely after many pages on the 
methodology of social science and more particularly of 
economics), it is not without significance. 

The need of premises was recognized the more clearly, 
the deeper men's comprehension of the rigid deductive 
method into which economics had fallen after 1800. The 
abstractions of Fichte in his "Closed Commercial State" 
of 1800, of Ricardo in 1817, of Thuenen in his "Isolated 
State," 1826, of Cournot in his "Researches into the 
Mathematical Principles of the Theory of Wealth," 1838, 
and of Gossen, whose "Development of the Laws of 
(Human) Commerce," 1855, marks an epoch in economic 
thought . . . these bold attempts at attaining precision 
were bound to arouse interest in suitable axioms. 
Utilitarian economics in this respect not only began a 
task, but also completed it. If freedom of vocation and 
of residence have recently been added as parts of the 
general assumption, this is of no great import. The act 
of commitment lay in the acknowledgment of human 
traits and of socially evolved liberties for individual 
initiative, without which political economy might be a 
business or an art, but not a science delving for laws of 
relations. 

Structural Characteristics. — Yet, that inconsistencies 
abounded and the classification of data was by no means 
the same for all students of the subject, may be seen at 
a glance from Table Two. Structurally economics owes 
a great deal to J. B. Say, whose work was discussed pre- 
viously, and to K. H. Rau. It was not likely that 
economists thereafter should be as indifiTerent to logical 
divisions as Smith had been. Ricardo on his part had 
provided a viewpoint for a treatment of economic facts 
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154. THE DEVELOPMENT OF ECONOMICS 

soon as economics was definitely understood as a study of 
principles of pricing and distribution, the case of produc- 
tion being" one of values and not one of volume, a certain 
sequence of arguments would suggest itself. In most in- 
stances this appears from the treatises tabulated. But the 
agreement assuredly is much less than one might have ex- 
pected, the cause being not merely the nature of the mate- 
rial which left much room for individual stress and 
strictures, but also the confusion of competitive with 
non-competitive concepts, as a result of which main 
divisions changed order, or special minor topics slipped 
into places where logic could not have defended it. Thus, 
even among Utilitarians as distinct from the Marginists, 
there was little agreement as to the relative position of 
Production and Price, not quite three-fourths preferring 
this order, while the rest reversed it in perfectly good 
faith. J. S. Mill characteristically begins with Produc- 
tion, then takes up Distribution, and then Exchange, this 
latter containing his views on value and price, while 
Consumption is held not to form part of economics. 
Ricardo of course had no direct interest in production 
or consumption, partly because he was guided by his 
criticism of Smith, and partly, no doubt, because of his 
general outlook. As will appear in a moment the defini- 
tions and laws derived largely from them prompted the 
Utilitarians to arrange their material differently from 
what they might have done had they clung steadfastly 
to their psychological theories. And this is perhaps the 
reason too why Consumption was treated so step-sisterly, 
driven from pillar to post, now called by one name and 
now by another, proving for some an invaluable aid in 
straightening out their affairs, but for others merely an 
inconvenient claimant whose real status could not be de- 
fined owing to irreconcilable viewpoints and aims* 



UTILITARIANISM 155 

So the outward form of both Marginal and Utilitarian 
economics varied considerably. Exchange dealt with many 
matters pertaining neither to production nor to pricing. 
Production now had one caption, now two. Distribution 
depended on laws not operative in Production, yet was 
often wrenched from Value or Exchange where prices 
of services no less than those of commodities were sup- 
posed to be explained. The question was: How could 
uniformity be introduced without reducing economics to 
a description of one single regime of perhaps purely 
national significance.? ^'^ 

Economics and Ethics. — The situation was complicated 
by the fact that some Utilitarians considered ethics an 
integral part of their work and therefore offered advice 
to governments in the belief that their science could not 
go wrong. From the start this relation of the Is to the 
Ought had figured in economic discussion. The Physio- 
crats like Smith had pointed to certain corollaries as suit- 
able means for new policies and the reconstruction of so- 
ciety. Their conclusions were taken seriously and tried 
out practically because the age was ready for a change. 
The abstract question as to how science can become poli- 
tics, or a moral ideal spring logically from a description 
of economic processes, was not yet formulated ; nor could 
it have vexed people who talked continually of a law of 
nature which itself prescribed the steps men should take 
to prosper. 

From the Utilitarian standpoint, however, the answer 
might be given in two different ways. Namely, it might 
appear as if, since pleasure was virtue and happiness at 
the same time, a moral issue was altogether impossible, 

" On the early history of structural features in economics see, e. g., 
Cannan, E. A History of Theories of Production and Distribution; or 
Cossa, B. Del Consumo delle Richezze, 1898. 



156 THE DEVELOPMENT OF ECONOMICS 

the real difficulty being merely the discovery of the 
cheapest means by which each could get his pleasure so 
that the "greatest happiness of the greatest number" 
was achieved. Or on the other hand, followers of the 
Utilitarian economics who accepted its psychology and 
general method, as laid down notably by J. S. Mill, might 
nonetheless espouse a non-utilitarian ethics that had noth- 
ing to do with economics. Furthermore, a question might 
of course be raised as to the exact meaning of the phrase 
by which the science was designated; in which case the 
dissension among economists need not arise from any 
particular notion of ethics, but rather from a desire to 
state the case of art versus science. What was "political 
economy," a science only or also an art? Or should 
applications of the science pass under a different title, 
supposing they were logically admissable? 

In a word, the Utilitarians were the first — though by 
no means the last! — to wrestle with the terms science, 
art, and ethics. Some were out and out hedonists and 
saw in morality no more than a convenient term for justi- 
fying an individualistic standpoint. Others never shared 
Bentham's opinion, but on the contrary preached a theory 
of ethics either in the style of eighteenth century intui- 
tionists, or in accord with the transcendental viewpoint 
which after 1830 gained an appreciable following even 
in England. And as for the continental economists it 
goes without saying that they never presumed to base 
their ethics on a pain-pleasure calculus. Rationalism 
precluded such a step in the earlier days, and later on the 
Kantian category, in one way or another, fastened itself 
upon the great majority of writers. This is shown not 
only by flowing passages on the high mission of eco- 
nomics as a discipline true to the best dictates of ethics — 



UTILITARIANISM 157 

as if social science needed this support — ^but also by the 
opposition of the Historical group, for one thing, to 
Smithianism or Ricardianism, and for another thing, 
to any injection of moral issues into economics proper. 
Indeed, going over the economic literature one cannot help 
but be impressed with the gradual ascendancy of the non- 
ethical economics, that is of the belief in economics as a 
science not simply distinct from ethics, but in its con- 
clusions probably incompatible with any theory of 
ethics ! 

Among those who did not clearly decide between politi- 
cal economy as an art and as a science we must place 
Smith in spite of his break with the old conception of 
"Moral Philosophy," but also some who were not of his 
age, yet wished economics to have a practical, semi-moral 
mission. Dugald Stewart, for instance, in his "Lectures 
on Political Economy" (probably penned between 1790 
and 1805) defined political economy as "those specula- 
tions which have for their object the happiness and im- 
provement of political society, or in other words, which 
have for their object the great and ultimate ends from 
which political regulations derive all their value. . . ." ^^ 
The "prevailing springs of human action" are to serve as 
a guide in this endeavor, and Population, Wealth, includ- 
ing Trade and Taxes, Pauperism, and Education of the 
Lower Orders figure as the main divisions of his survey, 
Bentham, in his "Manual of Political Economy," 1793, 
declared: "Political Economy is at once a science and 
an art." ^^ Non-interference was to be the general 
principle, as was shown particularly in his "Defence of 
Usury," 1787. Yet there were cases where "Agenda" 
seemed advisable, or at any rate excusable, and some of 

" Collected Works, 1802, Introduction, and vols. 8 and 9. 
" Opening sentence of Manual. 



158 THE DEVELOPMENT OF ECONOMICS 

these were mentioned as means toward the attainment of 
happiness for the greatest number.^^ Ethics could not 
form a distinct subject for the examination of economists, 
since on his hedonistic premise the good and the valuable 
for exchange coincided completely. 

Chalmers, whose "On Political Economy in Connection 
with the Moral State and Moral Prospects," 1832, had 
a special mission aside from influencing the younger Mill, 
wrote in his Preface: "Political Economy aims at the 
diffusion of sufficiency and comfort throughout the mass 
of the population by a multiplication or enlargement of 
the outward means and materials of human enjoyment," ^^ 
religious education becoming important for this reason. 
McCulloch thought that economics included necessarily 
a "discussion of the means whereby labor may be rendered 
most efficient, or whereby the greatest amount of neces- 
sary, useful, and desirable product may be obtained with 
the least possible quantity of labor," ^^ an opinion that 
endowed with virtue what ordinarily passed as plain 
greed. 

If we turn to France and Germany we shall find the 
friends of an independent, non-utilitarian ethics laboring 
for a reconciliation of the Is and the Ought in social life. 
J. B. Say, of course, had set a precedent by his cate- 
gorical exclusion of morals from economy, but many later 
writers, even when acknowledging the superiority of Say's 
presentation, preferred to be illogical rather than un- 
ethical. Thus Bastiat, Baudrillart,^^ and Cauwes ^* 
betray a strong undercurrent of moralism; while in 

20 Manual, ch. 1. 
2^ Pages iii-v. 

22 Principles of Political Economy, Part II, § 1. See also Scrope, G. P. 
Principles of Political Economy, 1833, p. 35. 

23 Baudrillart, M. H. Des Rapports de la Morale et de I'Economie 
Politique, 1860. „^„ ^ 

2*Cours d'Economie Politique, 3. edit., 1893, vol. 1, pp. 8-12. See 
also Block, M. Les Progres de la Science Economique, 1890, vol. 1, p. 35. 



UTILITARIANISM 159 

Germany the Socialists of the Chair felt constrained per- 
haps as much by circumstances as by theoretical aims 
to wed economics to ethics. Wagner himself, as editor 
of the encyclopedic "Manual," exerted considerable in- 
fluence in this direction, not only in Germany, but else- 
where.^^ Thus it is not at all strange that one should 
read in Schoenberg's "Manual" : Economics does not pri- 
marily ask "whether the greatest possible amount of 
wealth is produced, but rather how men live, how far 
through their economic activity the moral aims of life 
are fulfilled, and how far the demands of justice, hu- 
manity, and morality are satisfied." ^^ The Historical 
movement had tended toward such a confession on the 
part of Utilitarian economists. It appeared commend- 
able to fuse ethics with economics, even if Ricardianism 
was otherwise retained and the metaphysical nature of 
moral questions granted out of hand. 

However, at its best and in its purest form Utilitarian 
economics was stripped of moral valuations. The con- 
scious and common aim of students was to separate the 
Ought from the Is, in the hope that economics might thus 
gain in scientific tone. Malthus in his "Principles of 
Political Economy," for instance, protested against 
moralizing even though "the science of political economy 
is essentially practical, and applicable to the common 
business of human life." ^'^ Senior in his article on 
"Political Economy," 1836, balanced the in- and ex-clu' 
sion of moral issues rather cautiously, not to say with in- 
decision, but perhaps one should take most seriously his 
evident predilection for rigid thinking and abstraction. 
Thus he wrote: "The questions, To what extent and 

«Lehr- und Handbuch, edit, of 1892, vol. 1, pp. 144-45. 
2«Handbuch, edit, of 1890, vol. 1, § 9. See also Cohn, G. Grund- 
legung der Nationalokonomie, 1885, vol. 1, pp. 74-77. 
" Edition of 1821, p. 9. 



160 THE DEVELOPMENT OF ECONOMICS 

under what circumstances the possession of wealth is, 
on the whole, beneficial or injurious to its possessor, 
or to . . . society? And what are the means by which 
any given country can facilitate such a distribution? 
... all these are questions of great interest and diffi- 
culty, but no more form part of the science of Political 
Economy in the sense in which we use that term, than 
Navigation forms part of the Science of Astronomy." ^^ 
In a similar vein spoke Whately,^^ James and J. S. 
Mill, Donisthorpe, Caimes, Bagehot, and Keynes. To 
quote only a few words from Donisthorpe, a writer 
less widely known than the others in spite of his attempt 
at an exact science: Plutology cares nothing "for the 
practical rules which may be deduced from its doctrines 
. . . ; still less for the mode in which wealth is [that is, 
ought to be] distributed amongst its proprietors." 
"Plutology investigates the laws of value. That is all." ^^ 
Thus he differed from Hearn whose work he otherwise 
deeply admired. 

In France the non-ethical attitude is represented by 
such different thinkers as Cournot,^^ Courcelle-Seneuil,^^ 
Cherbuliez ^^ (a Swiss), and much later Colson, the author 
of the "Course of Political Economy," 1901-.^^ As in 
Germany, so here the practical value for the statesmen of 
many economic theorems is recognized, but without any 
willingness to identify statesmanship with ethics ! The 
belief in a science of economics was stronger than the 
interest in the foundations of moral judgments. An un- 

2» Introduction. 

28 Lecture on Political Economy, 1831, p. 50. 

30 Principles of Plutology, 1876, pp. 2-3 ; a work influenced by Hearn, 
W. E„ the author of Plutology, 1864. 

" Researches into the Mathematical Principles of the Theory of 
Wealth, 1838, translated by Bacon, N. Y., 1897, p. 16. 

32 Traite Theoretique et Pratique d'Economie Politique, 1858, vol. 1, 
p. 8. 

" Precis de la Science Economique, 1862, vol. 1, pp. 6-7. 

" Cours d'Economie Politique, 2. edit., Book I, ch. 1. 



UTILITARIANISM 161 

equivocal separation of the two fields of study seemed most 
natural or least fraught with disagreeable consequences 
for economics. This view was of long standing and widely 
prevalent. We find it in the United States, too, where a 
number of scholars gave currency to European economic 
thought. F. A. Walker, whose "Political Economy," 
1887, is a milestone in the development of American 
economics, may be quoted as representative of other men, 
though it would be wrong to suppose that the a-moral 
view won the day easily. Quite the contrary is true. 
We read: "The economist as such has nothing to do 
with the question whether existing institutions or laws 
or customs are right or wrong." . . . "The writer on 
ethics who deems the greatest good of the greatest num- 
ber the ultimate rule of right may indeed make excursions 
into economics, in order to judge of the moral quality of 
an act or a system, by its eifects on the production and 
distribution of wealth ; but the economist on his part has 
no occasion to cross the boundary line." ^^ In general, 
economists held this position the more outspokenly, the 
more logical their reasoning from the premises given, 
the more determined their effort to build on the definitions 
fundamental to their science. 

Definitions. — Definitions and laws were laid down more 
or less exactly soon after Smith had published his 
"Wealth of Nations," but it was particularly the psychol- 
ogy and methodology of Utilitarian economics that 
brought a high degree of precision and agreement into 
the principal works of the time. A nomenclature devel- 
oped which still constitutes part of the economist's work- 
ing apparatus. Premises were carefully consulted in 
defining such fundamentals as utihty, value, wealth, capi- 
tal, production, consumption, labor, etc. The search 

" Pages 26-7. 



162 THE DEVELOPMENT OF ECONOMICS 

for principles, that is for constant relations between facts 
which should prove not merely the continuity from an 
anorganic to an organic world, but also furnish data 
for reformers and legislators, included studies in logic, 
implicitly or expressedly. Among all classes of thinkers 
the deductive method was favored either in practice or 
theoretically. J. S. Mill's procedure is representative 
of that of the great majority, even though they could 
not claim his mastery of the subject. What he him- 
self had hoped from an inductively conducted examina- 
tion into social processes was overlooked, but the route 
by which he sought a formulation of laws, to be valid 
for many nations and for long periods of time, led 
others to like conclusions. Dissent was rare at first. 
Only as a result of the steadily gaining long-time view 
of social institutions was the prestige of the Utilitarians 
dimmed, and then interest centered in two different prob- 
lems, neither one of which had ever been given much 
thought. 

For in Utilitarian economics the objective and static 
version was the only legitimate one. The world was taken 
to be real, and the usefulness of things as inherent in 
them, certain reservations notwithstanding. Utility was 
of matter as well as for men. Cost was outgo of mate- 
rials and not primarily a pain, though the Benthamites 
knew of the latter. Income referred to goods and not 
to legal rights. Measurement was by a standard acces- 
sible to all, namely, by stuff or time, labor being back 
of both. In a word, though individualism had triumphed, 
there were echoes of the Physiocratic chant in praise of 
a beneficent nature and the perfectibility of Man. 

The foundation rock of course was the concept of 
value, itself analyzable into the elements of utility, 
scarcity, and labor. Without labor, it had at the begin- 



UTILITARIANISM 163 

ning been preached, things could not acquire value, a 
view, however, which was gradually dispelled and replaced 
by the more logical one that what counts is not a physical 
change in external objects, but an attitude on the part 
of human beings. Scarcity therefore was found more 
decisive than energy previously spent, and this could 
mean nothing less than establishing a ratio between wants 
of people and the supplies on hand. That things useful 
would become the more valuable the less there was of 
them, was consequently understood at an early date, the 
comments of the Earl of Lauderdale on this subject being 
the prototype of most things said since. A paradox thus 
hove into view which it might take time to explain, but 
the reality of which none could deny. And as to this 
question of utility itself, the first step was a ruthless 
overriding of moral conceptions. In discussing values 
the problem of ultimate values was to be left out. It was 
nobody's business whether values satisfied theological or 
ethical norms or not. For the Utilitarians in the narrower 
sense economic and "higher" value was one; for others 
the stress was on a separation that should leave science 
untrammeled. Hence things were useful if they served 
to satisfy wants. The capacity of anything, whether 
tangible or not, to gratify any want whatsoever, was the 
proof of its being useful. As J. S. Mill observed in his 
"Principles of Political Economy," 1848: "Political 
Economy has nothing to do with the comparative esti- 
mation of different uses in the judgment of a philosopher 
or of a moralist. The use of a thing . . . means its 
capacity to satisfy a desire, or serve a purpose." ^^ 

Now, given utility and scarcity, or simply labor 
embodied in an object, or our right to exchange such 
objects, the definition of value is easy. Namely, it is 

ssBook III, ch. 1, § 2. 



164 THE DEVELOPMENT OF ECONOMICS 

"the command which the possession of a thing gives over 
purchaseable commodities in general.'* ^'^ Value repre- 
sents a relation between a person and something external 
to him, but it also expresses a relation between two or 
more articles measurable by the rate at which they are 
exchanged. Either one may serve as a unit for measure- 
ment. The customary one is a piece of currency, a 
standard legally defined, in which case we speak of money 
and price respectively. But it is not necessary that the 
exchange ratio be so reckoned. In barter the exchange 
is necessarily at a certain rate too; and here the value 
of the things exchanged is revealed. The market ratio 
increasingly received people's attention, the idea of a 
"natural" value being dropped as of no bearing on the 
main subject. Besides, there was an ethical element in 
the "natural" price that Utilitarianism could not approve 
of without jeopardizing its position. 

However, it was granted that individual and social 
viewpoints might go far apart, and so from Lauderdale 
up to the present the definition of wealth has proven an 
apple of discord. For, strictly speaking, wealth had to 
be defined as "everything which has a power of purchas- 
ing"; but though this agreed well with the theory of an 
"economic man" and the delimitation of economics in 
utilitarian style, it occasioned much speculation as to the 
relation of national to individual wealth. The difference 
was soon noticed and courageously expounded. The Earl 
of Lauderdale once more set an example. John Rae in 
1834 in America, and McCulloch and Torrens in England 
made much of the distinction, the hope being now to give 
economics a moral setting, now to accentuate the scien- 

" Ibidem. See also Pantaleoni, M. Principles of Pure Economics 
(translated from the Italian by Bruce, T. B., 1898), ch. 4. For a classi- 
fication of definitions of price see Fetter's article in Atnencan Economic 
RevieWj vol. II, 1912. 



UTILITARIANISM 165 

tific character of a discipline newly arisen. Indeed, the 
competitive concept gained the upper hand. Men like 
Say in France, Ricardo in England, and Hermann in 
Germany lent prestige to the terminology evolved from 
eighteenth century psychology and hedonism. The sig- 
nificance of rights was opposed to the older notion of 
things for use. Classes of wealth were enumerated and 
the differences between land and non-land wealth, or 
between producible and reproducible, or between durable 
and ephemeral, forms of wealth pointed out. But such 
facts, though significant for a national view of wealth, 
could not blind men to the entrepreneur background of 
their definitions. 

The definition of capital changed also by degrees. At 
first it had meant "stock" in hand, that is, concrete 
things and notably foods for the laborer, the manufac- 
turer being supposed to decide how much should be 
"saved" and how much put to personal uses. The "stock" 
was a circulating item. It was the surplus of the 
Physiocrats. The aim was to exhibit to the layman's 
glance the mechanism, the law of nature, by which all 
classes were fed and the cycle of production and consump- 
tion might go on forever if the surplus were properly 
handled — taxes included. Hence the terms circulating 
and fixed capital. Smith having defined the latter as stock 
"employed in the improvement of land, in the purchase of 
useful machines and instruments of trade, or in such-like 
things as yield a revenue or profit without changing 
masters, or circulating further." ^^ Whether an article 
therefore changed hands or not in the course of business 
for profit was an important question to Smith. But from 
Ricardo on, while capital is more emphatically than ever 
a source of income irrespective of its form or lack of 

«« Wealth of Nations, Book II, ch. 1. 



166 THE DEVELOPMENT OF ECONOMICS 

definite form, circulating capital consists of rapidly 
perishable items, while fixed capital referred to items not 
subject to quick deterioration or wear.^^ The problem 
of expenses as against labor-costs had driven Ricardo 
to this new distinction, and of course it was no obstacle 
to his main contention that capital was an individualistic 
concept. It was agreed that capital might or might not 
be the result of labor, or of savings, and that in one sense 
the matter was inconsequential so long as the destination 
of this surplus was understood. In other words, as the 
wages-fund controversy showed clearly, capital was 
pictured as a fund of values convertible at will into any 
number of things either for the use of personal servants 
or of day-laborers, or of farm-hands. But since either 
possibility had to be reckoned with the ratio of capital 
to laborers was important. Here therefore the collecti- 
vistic standpoint crossed the competitive, and thanks 
to the labors of Hermann, Rodbertus, and later on 
A. Wagner the rights-aspects became familiar to all. 

Production and consumption too were defined both 
from the social and from the individual standpoint, 
although in harmony with the premises the latter tended 
to predominate. The original aim was of course the 
creation of utilities. It was granted from the start that 
man could not create matter, but only transform one kind 
into another for his particular purposes. The whole 
analysis of progress as the Naturalists offered it veered 
about this relation between man and materials. Even 
J. S. Mill opens his treatise with this sentence: "The 
requisites of production are two: labor and appropriate 
natural objects"; and he continues telling us about the 
differences between creating and converting things. So 
it is not to be wondered at that the physical aspects of 

»» Ricardo, D. Principles of Political Economy, ch. 1, § 4. 



UTILITARIANISM 167 

production should preoccupy the Utilitarians to the last. 
However, the possibility of "producing" without turning 
a hand, without ardent labors or the employment of large 
funds was impressed upon people more and more. It 
turned out ere long, as might have been predicted from 
the premises, that to produce is to render a service, and 
that the evidence for this latter act was price or appre- 
ciation itself, not the technique of production which to 
society at large is so fundamental. Production therefore 
ceased to be associated with the handling of concrete 
objects. Whether value took embodiment in tangibles 
or not, it was conceded that a productive act might have 
occurred. 

Consumption. — But conversely it could not then be 
maintained that consumption necessarily involved a 
destruction of things, nor even that use is the sole test 
in the definition. Consumption, it soon appeared, might 
mean either use with or without either physical or value 
changes, or either one of the latter two without accom- 
panying use. As to which was the surer method of find- 
ing out, not all could agree. In general, there arose two 
arguments, one emphasizing the use of goods, and the 
second the loss of values as the quintessence of consump- 
tion. The former suited the majority of economists, 
though even here dissension arose as to whether use had 
to result in physical or value change or not, in order to 
signify consumption. McCuUoch in 1825 wrote: "Anni- 
hilation of those qualities which render commodities use- 
ful and desirable" *^ is the natural result of consumption. 
Senior expressed himself similarly ,^-^ and so D. Raymond, 
E. P. Smith, and F. Walker in America. Raymond, how- 
ever, marred his argument by adding : "A service of plate 

«» Principles of Political Economy, 1825, Part IV. 
« Political Economy, edit, of 1858, pp. 83-4. 



168 THE DEVELOPMENT OF ECONOMICS 

may last for ages, although it is said to be consumed 
when purchased by him who designs to use it." *^ E. P. 
Smith, whose "Manual of Political Economy," 1853, 
shows the influence of H. C. Carey, wrote: "The consump- 
tion of a product is nothing else than its passage from 
a state of inertness to one of activity, as from the inor- 
ganic or mineral region to the vegetable or vital." This 
of course harmonized well with the sociological standpoint 
of his master, but for the Utilitarian system it had even 
less weight than F. Walker's definition of consumption as 
the "use made of wealth" which "does not necessarily 
imply the . . . exhaustion of the value which had at some 
time been imparted to" ^^ such wealth. 

And so one might cite also the German economists 
Hermann,"*^ Schulze,^^ Schaffle,^^ Schoenberg,^'' etc. To 
them use was the decisive feature, not de-valuation. In 
one connection they contrasted demand and use with 
supply through production, in another they denied the 
shrinkage of supplies irrespective of withdrawals from 
the market. Schaffle was influenced by his sociological 
bias ; some of the others by the Historical, i. e., collec- 
tivistic viewpoint. In France too writers like Cauwes,^^ 
Block,^^ Colson,^^ Blanchard,^^ Leroy Beaulieu,^^ and 
Gide ^^ dwelt on use as the test for "consumption," use 
being sometimes identified with destruction physically, 
or of values, and then again not. 

« Elements of Political Economy, edit, of 1836, vol. 1, pp. 118-20. 

« Political Economy, edit, of 1887, pp. 292-93. 

** Herrmann, F. B. W. Staatswirtschaftliche Untersuchungen, 1832, 
pp. 328-29. 

*5 Schulze, F. O. National okonomie, 1856, p. 269. 

« Das Gesellschaftliche System der Menschlichen Wirtschaft, 1873, § 4. 

" Handbuch, vol. 1, pp. 685-86. See also Cohn, G. Grundlegung der 
Nationalokonomie, 1885, vol. 1, p. 212. 

*^ Cours d'Economie Politique, vol. 1, p. 653. 

" Les Progres de la Science Economique, 1890, vol. 2, p. 486. 

"0 Cours d'Economie Politique, vol. 1, p. 114. 

"Cours d'Economie Politique, 1909, vol. 1, p. 307. 

" Traits Thgoretique et Pratique de I'Economie Politique, vol. 4, p. 200. 

" Political Economy, translated and published by Heath (D. C.) & Co. 
from 3. French edition, Book 5, ch. 1. 



UTILITARIANISM 169 

As against this Idea, however, we find thinkers like 
Say,^* Boileau, Storch, Rau, Roscher prefer the com- 
petitive view, according to which one had "consumed" 
in losing values, be they socially measurable or not. 
Boileau in his "Introduction to Political Economy," 1809, 
tells us: "Consumption may be effected by nature, by 
individuals, or by society at large." . . . "To consume 
is to destroy the utility or the value of things." ^^ Use 
then was an ordinary antecedent to consumption, but it 
could not be its sole cause. Rather it was a question of 
either incurring a loss of wealth individually conceived, 
or of not incurring it. In the former case there was 
consumption, in the latter not. The problem reminds one 
of the controversies about unproductive versus produc- 
tive labor or use of wealth. What was used '*produc- 
tively," and what not? The disputants never grew tired 
of this — to us — falsely stated question: and yet it had 
to be admitted that in the first place it depended upon 
the point at which "economic" facts ceased to be 
"economic," and in the second place upon the definition 
of value. If the orthodox Utilitarian premises ruled, 
productiveness was a function of value-gains, whether 
these represented mere acquisition or effort resulting in 
tangible wealth. To say like Senior that unproductive 
consumption "occasions no ulterior product,^^ had sense 
only on the assumptions just stated. 

But see how fickle the mind of the Utilitarians also 
with regard to "cost," a concept truly fundamental in 
economic analysis! Several definitions became current 

"Treatise on Political Economy, American edit, of 1827, Book III, 
ch, 1 and 4. 

55 Pages 341-42. See also Roscher, W. Grundlegungen der National 
okonomie, 2. edit., vol. 1, pp. 405-10 ; and Rau, K. H. Lehrbuch der 
Politischen okonomie, 6. edit., vol. 1, pp. 412-15. 

s« Political Economy, 2. edit. For a brief discussion of Consumption 
see Keynes, J., Scope an^ Method of Political Economy, ch. 3, Note, or 
for a fuller treatment, Cossa, E., Del Consumo delle Richezze, 1898. 



170 THE DEVELOPMENT OF ECONOMICS 

after 1800. For instance, cost as labor expended upon 
the object, or as labor necessary to its reproduction, 
or as labor saved for the buyer of the article if otherwise 
he should have to produce it himself. In each case the 
standard and the measure both were labor — a notion of 
long lineage and revived by Smith, — but owing to differ- 
ences in personal capacity or productiveness and in rates 
of production relative to two or more instances of time 
a choice had to be made which some found embarrassing. 
Besides, there was the idea of abstinence of Senior and 
J. S. Mill and A. Marshall ; the distinction between labor 
or material outlays and monetary expenses, past or 
present or impending, and finally the idea of labor pain 
which Cairnes discussed at leisure in his "Some Leading 
Principles of Political Economy Newly Expounded," 
1874. In America Carey stood for reproduction costs; 
on the continent the original costs figured most promi- 
nently, though the dynamic aspects of the problem 
received attention especially after 1850. 

Laws. — But given these several definitions, the weightier 
question of course was that of laws ruling economic 
interactions. What laws could be found, and how were 
they to be formulated? The development of economics 
as a science would have to be gauged chiefly by success 
in this field. It was the boast and glory of the Utilitarians 
that they had improved upon original statements and 
delivered unto the world a set of facts upon which wise 
men might build, if they cared to prosper or help others 
to prosper. 

As a general, but not uninstructive conception of such 
economic laws, that of Keynes in his "Scope and Method 
of Political Economy," 1891, even though written with 
knowledge of the marginal standpoint, may be cited first. 
Among propositions of universal validity he mentions: 



UTILITARIANISM 171 

''A general rise of values is impossible; if two kinds of 
commodities have the same law of utility, that which is 
rarer will be the more valuable; of different methods of 
production which can be used for obtaining a given result, 
the one that can do the work the most cheaply will in 
time supersede the others ; facilities of transport tend 
to level values in different places, while facilities of pres- 
ervation tend to level values at different times. In the 
same category may be placed such propositions as that 
no commodity or service can serve as a universal measure 
of value between different times and places, and that 
general over-production in a literal sense is impossible." ^^ 
Most of these assertions, it will be seen, are deduced di- 
rectly from premises in psychology ; while the first is an 
axiom and the second an inference from the fact of un- 
equal incomes. 

However, one must go to particulars in order to 
appraise correctly the value of Utilitarian economics ; and 
here the first crucial test concerns itself with the deter- 
mination of price. 

Thanks to definitions of value and cost already given 
several standard solutions came into vogue. At the outset 
namely labor was deemed to be not only a sufficient cause, 
but also the sole measure of value, respectively of price. 
The question merely arose whether it should be labor 
spent in the past or labor requisite to the reproduction 
of the good ; both being considered determiners by differ- 
ent thinkers. Malthus was among the first to stress costs 
of reproduction. Carey agreed to this, but thought that 
labor saved was the criterion rather than labor spent by 
the producer. Bastiat is best known as the defender of 
this view, though he can scarcely be called its originator. 
But furthermore, the Smithian dual treatment of costs, 

" Page 295. 



172 THE DEVELOPMENT OF ECONOMICS 

involving now labor exclusively, now costs as the 
entrepreneur understood them, was resumed with vigor 
by Ricardo, with the result that it not merely changed 
current concepts of capital and profits, but particularly 
eliminated labor as the chief measure of values. The 
conflict, to be sure, did not terminate with the recognition 
of the difference, for we find it discussed more fully by 
continental writers, and, on the other hand, the labor 
concept appealed to the radical wing who aimed at an 
overthrow of the prevailing competitive system; but 
certainly the logic of events was with the expositors 
of business expense. These pecuniary outlays were taken 
more and more seriously. Either as an average or as a 
maximum, as in the researches of the German Herrmann, 
they served to explain price. To some like Carey it was 
expenses of reproduction; to others the original outlay 
on the supposition that nothing else changed. The facts of 
change had to be ignored, for Marshall's deus ex machina 
in the shape of a long-time cost and a representative firm 
had not yet been introduced. But on the Ricardian prin- 
ciple the price of a finished article was held not to include 
rentals. As long as his concept of one-use lands, no-rent 
lands, differential productivities, and population-pressure 
seemed irrefutable rent could not figure in such prices. 
But what of the law of supply and demand? Was this 
to be trodden under foot because of costs in the objective 
sense? The answer was: By no means. Demand, meaning 
by it want accompanied by purchasing power, was as 
genuine a factor in the situation as ever; but one should, 
nonetheless, regard it as only a function of value on the 
one hand, and of supply on the other. Malthus, e. g., 
had already warned his readers that supply and demand 
is "the dominant principle in the determination of prices," 
and "costs of production can do nothing but in subordi- 



UTILITARIANISM 173 

nation to it, that is merely as this cost affects . . . the 
relation which the supply bears to the demand.'^ ^^ This 
was in itself quite a conundrum. However, by the time 
that J. S. Mill wrote his "Principles" it was necessary to 
go still farther, lest the public should be altogether in 
the dark. So now, in spite of an audacious juxtaposition 
of labor costs and expenses — in which even taxes had a 
part — the theorem was propounded which has since 
become a commonplace. To wit, we are told that sup- 
ply and demand cannot be ratios, nor that it is fair 
to think of a causal relation running in one direc- 
tion, since in reality the definition of demand and 
value prove merely that supply and demand must equate 
at some point, for "competition equalizes them." Say 
had long ago called attention to the inadequacy of 
the Smithian formula. Now, a half century later, it is 
argued that demand depends on value just as truly as 
the reverse may be asserted. For commodities therefore 
"not susceptible of being multiplied at pleasure" (and 
this class Mill admitted is large), "the value which a 
commodity will bring in any market is no other than the 
value which, in that market, gives a demand just sufficient 
to carry off the existing or expected supply." ^^ Nomi- 
nally this explanation covered only the group mentioned, 
namely, the non-reproducibles at will, but on second 
thought its importance for all other articles became pal- 
pable enough. If Mill, therefore, found a price law for 
goods not reproducible at all, and a second for goods 
reproducible at changing returns, this did not deceive 
other writers. Increasingly expenses are analyzed at the 
sacrifice of non-competitive costs ; increasingly the issue 
is seen to lie as between demand and supply, the latter 
going back to expenses. The absence of a proportionate 

5* Principles of Political Economy, ch. 2, § 3. 

''^Mill, J. S. Principles of Political Economy, Book III, ch. 2. 



174 THE DEVELOPMENT OF ECONOMICS 

rise or fall of prices for changes in supply is noted by 
statistical inquiries. Tooke's announcements exercised 
a deserved influence over theorists in his country. The 
law of price continues to absorb people's interest, but 
unanimity is no longer to be hoped for as perhaps in the 
days of Adam Smith. 

As to productivity, meaning output relative to outgo, 
a consensus of opinion could more easily be reached, 
for it was understood pretty widely that such rates 
referred to physical quantities. Rightly or wrongly, the 
phrase was given that meaning. It had not infrequently 
been stressed how nature set bounds to supply, the 
Ricardians bewailing her stinginess, just as the Physio- 
crats had rejoiced in her liberality. But independent of 
this productivity could best be studied as a change of 
returns in tangible goods. Laws of nature. Mill wrote 
in his "Principles," here ruled inexorably, while dis- 
tributive arrangements rested with man himself. Waiving 
altogether the logic of this distinction, in the light of 
Utilitarian premises, we need merely ask whether at that 
rate the law of diminishing returns could fitly be asso- 
ciated with agriculture; and the answer will be: Yes. 

Once more a coUectivistic view crept into an analysis 
supposedly resting on competitive premises. The ratio 
of food to population was too important to be disre- 
garded. Not value-returns per value, not unit-cost in 
stuff per return in stuff even, but subsistence per capita — 
this became the burning question. It was not by accident 
either; for the swiftly growing population of the United 
Kingdom, due to the industrial revolution, cut at the 
old-time surplus of foods in two ways, first by reducing 
acreage, and secondly by industrializing capital so that 
exports of manufactures could furnish a basis for food 
purchases abroad. Thus the birth-rate turned out to 



UTILITARIANISM 175 

depend in one sense on industry, while yet in another the 
relative decline of farming haunted theorists. Intensifi- 
cation could accomplish much, but a disproportionate 
outlay of materials and labor went with it. Hence the 
fear of falling productivity measured by weight and tale ; 
jhence the flow of books and tracts from the press, con- 
demning now the laborer with a large family, now 
employers for their tolerance of conditions that seemed 
truly barbarous. Nothing else than a careful husbandry 
of resources could alleviate such misery. On the one hand 
thrift among wage-earners ; on the other a correct use 
of surplus-funds; this appeared to be the logical way 
out of difficulties. Saving was everything, or at any rate 
far more than technical progress. Conservation, not 
invention, was held to be the source of opulence. Capi- 
talists therefore figured as the saviors of the country 
if they administered their reserves prudently. 

The distribution of the social dividend became an impor- 
tant matter for this reason alone, though to be sure it 
was also of cardinal significance from a theoretical stand- 
point. But in spite of definitions and price analysis 
incomes were not consistently measured as prices, as for 
instance Say and Rau had urged in their endeavor to 
reduce all shares to three: Wages, profits, and rent. A 
distinction was made before long between net profits and 
interest, due indirectly, no doubt, to the growing promi- 
nence of banking and credit. But from the outset the law 
governing wages was considered different from that gov- 
erning rent, and both were set apart from the analysis of 
interest or profits, until Malthusianism was definitely 
abandoned. 

Rent which according to Smith was a price paid to 
privileged landholders was thereafter explained as a 
result of over-population. It was a differential product, 



176 THE DEVELOPMENT OF ECONOMICS 

measured by yields above what worst soils could bring, 
and certain to rise so long as the number of mouths to 
feed increased faster than land itself. There was no 
remedy for the evil, if so it might be called, for prices 
followed maximum costs of production at any given 
instant of time, and if the owners of superior soils 
pocketed the differential, that was human nature every- 
where. The fault lay not with the proprietor, but with 
nature or with the people who would marry and reproduce 
their kind regardless of expenses. 

However, it was eventually admitted that the idea of 
differentials was not applicable merely to agriculture. 
If rent, as in successive installments had been shown 
by Anderson, West, Malthus, and Ricardo, was due 
to unequal productivities of the soil, there were also 
differences of yield in the use of labor or of capital. 
Natural inequalities existed everywhere. There was noth- 
ing peculiar about the circumstance that accounted for 
rent. "Superior mental power, regarded with a view 
to the production of wealth," Cairnes emphasized in his 
writings, also "is an instrument of production perfectly 
analogous to superior fertility of soil; they are both 
monopolized natural agents, and the share which their 
owners obtain in the wealth which they contribute to pro- 
duce is regulated by precisely the same principle." ^^ 
So F. Walker, commenting on Archbishop Whately's 
discussion of rents and profits, adds : "Profits, the remu- 
neration of the entrepreneur, partake very largely of the 
nature of rent, being a species of the same genus ; and 
so far as this is the case, profits do not form a part of 
the price of the products of industry, and do not cause 
any diminution of the wages of labor." ^^ The over- 
do Character and Logical Method of Political Economy, 1869, p. 13. 
«i Political Economy, Part IV, ch. 4, § 279. 



UTILITARIANISM 177 

confident Rlcardians thus were told: If rent formed 
no part of price, neither did profits or wages above 
subsistence, and if rent was a justifiable increment re- 
gardless of social consequences, so would be any rate 
of wage or profit or interest, no matter how remote 
from competitive limitations. The error of drawing a 
line between price and income thus led to the same sim- 
plification that a strict price analysis would have in- 
volved, for not only was the law of diminishing returns 
expanded into a principle of natural inequality among 
all factors of production, but in addition all shares, 
interest not excepted, proved to consist of a subsistence 
allowance and a super-share, the battle waging about the 
disposition of this latter. 

Particularly under the static conditions premised by 
both Utilitarians and later the Marginists such a conflict 
was inevitable if superiority meant no more than greater 
earning powers according to definition of value and pro- 
ductivity. Since the economic process was pictured as one 
of constant factors, pricing and distribution had neces- 
sarily to entail a struggle among claimants. It was natur- 
ally held that what one gained another lost. Even differen- 
tial mental abilities would thus hold out no hope to society 
at large. The masses of the people were thrown upon 
their own meager resources in a contest where instincts 
invariably succumbed to selfish cunning. Partly for this 
reason Utilitarian economics became a "dismal science," 
as Carlyle dubbed it; and from this standpoint also 
Ricardo could make the often quoted remark: "Wages 
like all other contracts should be left to the fair and free 
competition of the market and should never be controlled 
by the interference of the legislature." ^^ If pricing was 
the result of the forces premised by the hedonists, and 

"2 Principles of Political Economy, ch. 5. 



178 THE DEVELOPMENT OF ECONOMICS 

if the deductive method had to work with the materials 
offered by the environment social and physical at any one 
moment, then certainly there was no other outlook possi- 
ble. Malthus was right in saying: "It is most desirable 
that the laboring classes should be well paid, for a much 
more important reason than any that can relate to 
wealth; namely, the happiness of the great mass of 
society. . . ." But *'owing to the principle of population 
all the tendencies are the other wayy ^^ The iron-law 
of wages of Rodbertus which was in everybody's 
mouth could not be defied as long as the Malthusian 
principle stood unshaken. The wages-fund idea itself 
was in no wise in contradiction with it, since any sur- 
plus voluntarily bestowed by capital upon labor served 
but to increase the number of children hungering for 
food. Thornton might write on "Overpopulation and its 
Remedy," 1846, but what could be done about it? 

Still, the wages-fund concept had its roots not in the- 
ories of population, but in erstwhile definitions of pro- 
duction and capital. It must be charged against the 
Physiocrats and Smith that men later tried to determine 
the wage-level by a ratio of surplus to laborers. For 
since to produce meant to turn out concrete commodi- 
ties, since capital was a surplus due to methods of pro- 
duction considered constant, it followed that the owners 
of "stock" were the umpires in the game. They decided 
who had won, the non-producers or the producers. They 
held the destinies of the nation in their hand because 
they could use their wealth either for further production 
of materials, or for maintenance of retinue and luxuries, 
personal and official services of all kinds included. In 
his "Principles" Mill thus divides circulating capital 
spent upon both productive and unproductive labor, 

« Principles of Political Economy, 1821, p. 365. 



UTILITARIANISM 179 

as he defined the terms, by the total number of hired 
laborers. The quotient was the average wage, while 
the dividend constituted the "wages-fund." ^^ The 
greater the number of unproductive laborers, the worse 
off eventually the whole population, for output could not 
then increase as fast as the actual surplus of foods might 
allow. 

Utilitarianism was not of course seriously affected 
by this argument, as the future proved sufficiently. How- 
ever, it seemed significant for a determination of wages 
if one had in mind the relative obligations of capital 
and workingmen; and from this standpoint it was no 
small matter if J. S. Mill recanted after men nowhere 
near his equal had raised their objections. Opposi- 
tion came from various quarters, some of them outside 
of the United Kingdom. Thus Rae and Carey derided 
the static notion of wage involved in the wages-fund doc- 
trine, while Thiinen and Walker (F.) advanced a pro- 
ductivity theory that accorded to labor precisely what 
Mill had so much at heart, namely, a share somewhat pro- 
portionate to technical improvements. The German econ- 
omist put up a formula by which the laborer should get 
a sort of geometrical average of products resulting from 
his and the machine's efficiency. What the least effec- 
tively employed man produced was to be augmented by 
a portion of capitalistic effort. Walker, on the other 
hand, knew nothing of margins, but contended that com- 
petition naturally favored an equitable distribution of 
the product, labor obtaining a wage that rose as inven- 
tion multiplied its productiveness through additional or 
superior use of machines. This then was just as prom- 
ising as Cairnes' notion of a non-competitive laborer who 
could not be cudgeled by an unscrupulous employer. 

"Book II, ch. 11, § 1. 



180 THE DEVELOPMENT OF ECONOMICS 

Besides — and without presuming to have mentioned all 
the doctrinal points regarding net profits, over-produc- 
tion, currency and price-levels, credit and taxation — -it 
must be admitted that theories did not after all find ex- 
tended application in government. The value of eco- 
nomics in this respect was not as great as might have 
been expected. Public authorities everywhere, however 
sincere their desire to benefit by the new gospel of wealth 
and welfare, sooner or later fell back upon their own 
devices. Excepting the field of banking and public 
credit, where the influence of economic doctrine was 
marked both in England and on the continent, govern- 
ments did not respond very sympathetically. For the 
repeal of the corn-laws in England had reasons other 
than Smithian theories, which came in the nick of time 
but could not have won a fight against practical inter- 
ests. Besides, there is the irrefragable evidence of other 
countries whose commercial policies almost consistently 
ran counter to Laissez Faire. Even in the United 
States Protection made considerable headway before 
1846, while in Europe France alone followed the British 
example for any length of time. It is symptomatic in- 
deed that Carey and List stood for protection, while 
Bastiat and Mill about the same time espoused free-trade ; 
or that the countries least conversant with economics, 
such as Denmark, Belgium, Holland, almost regularly 
upheld international competition. The great majority of 
French economists throughout the nineteenth century 
preached free-trade, but rarely to please the people. 
Their position was somewhat like Cournot's who in his 
"Researches into the Mathematical Principles of the 
Theory of Wealth,'' 1838,^^ had to confess that pro- 
tection need not be a bad thing if it did not offset ad- 

«^Last chapter. 



UTILITARIANISM 181 

vantages gained by other opportunities lost, or if it 
didn't lead to class taxation; both of which it was dif- 
ficult to prove. So, under the circumstances, what else 
was there but to consent to policies diametrically op- 
posed to a static view of production? The free-trader 
faced an insurmountable obstacle! 

Decline of Utilitarian Economics. — Utilitarian eco- 
nomics, however, remained not merely unheeded at courts 
of legislation, but what is more to the point, weighty 
theoretical objections appeared. The theory of dimin- 
ishing returns, for instance, was extended by v. Thuenen 
to the whole realm of production. It was shown even 
then that rightly understood agricultural laborers were 
little worse off than the urban. In the second place 
the Malthusian theorem was combated vigorously by a 
number of writers partly out of mere humanitarian sen- 
timent, partly because the case for agriculture was not 
held to be nearly as grim as the English preacher had made 
out. His later concessions were therefore taken to be more 
truthful, and if so the distributive problem had to be, 
of course, restated. In the end such was the effect of 
the counterblast of men like Lloyd, Chalmers, Gray,^^ 
Scrope ^'^ and Donisthorpe in England, Sismondi in 
France, and Wayland and Carey in America. But for 
that matter, had not Senior himself said: "A popula- 
tion increasing more rapidly than the means of sub- 
sistence is, generally speaking, a symptom of misgovern- 
ment indicating deeper-seated evils, of which it is only 
one of the results"? ^^ 

The wages-fund idea had been definitely abandoned at 
the time of J. S. Mill's death (1873). It could not sur- 
vive the successive attacks of Thornton, Jones, Leslie, 

««Gray, J. The Social System, 1831, ch. 10. 

«T Scrope, G. P. Principles of Political Economy, 1833. 

«« Political Economy, edit, of 1849, p. 49. 



182 THE DEVELOPMENT OF ECONOMICS 

and of Herrmann in Germany. Mill himself had recog- 
nized its uselessness and said so openly. The Ricardian 
rent doctrine suffered at the hands of Jones, Rodbertus, 
Carey, and Bastiat. In fact, it was one of the first fun- 
damental points to be assailed in an attempt at obtain- 
ing a clear-cut case for competitive pricing. As a 
monopoly, rent had a place and could be fitted into rules, 
each and every one of which had its exception. But 
otherwise it occupied an anomalous position, besides be- 
ing vulnerable from the historical standpoint as Carey 
was not slow to indicate. 

That labor measured values was also found to be an 
untenable assertion, the ultimate answer to which was a 
resort to either costs of reproduction, as with Malthus, 
or to supply and demand which really involved a petitio 
principiiy or to monopoly or maximum costs, these latter 
meaning for the most part enterpreneur expenses, the 
discussion of which is particularly convincing in Herr- 
mann and Mangoldt. But if all this was granted, what 
became of the relation of price to producer-shares ? Evi- 
dently, the two need in no wise coincide. Not only were 
there incomparable kinds of labor, as MacLeod and 
Cairnes had pointed out; not only were there discrepan- 
cies involved in the traditional analysis of prices or 
shares, but furthermore the reliance upon laws of dis- 
tribution psychologically derived had proven futile. 
Ever and anon the non-competitive standpoint en- 
croaches upon the competitive. Even Malthus could 
write: "If we were to define wealth to be whatever has 
value in exchange, it is obvious that acting, dancing, 
singing, and oratory would sometimes be wealth, and 
sometimes not." ^^ Precisely in this temper had J. Rae 
in 1834 enlarged upon the earlier criticisms of the Earl 

«» Principles of Political Economy, p. 34. 



UTILITARIANISM 183 

of Lauderdale, drawing a sharp line of division between 
social and individual wealth, and ending his discourse with 
a plea for scientific government. Rodbertus and Wagner 
in Germany accentuated social as against acquisitive 
wealth, an awkward way of renouncing the Utilitarian 
premises. Continually facts outside of the exchange 
regime were brought in to supplement explanations 
from within. In his "Principles of Plutology," 1876,'''^ 
Donisthorpe passed judgment on "classicism" as a whole, 
convinced that neither the law of the division of labor, 
nor free-trade, nor Malthusianism, nor Ricardian rent had 
justified itself. 

The golden harmonies, too, that Carey and Bastiat 
sung about, had existence only outside of the Utilitarian 
economics, if we may believe these men. In 1837 Carey 
could write: "The prosperity of nations, and the hap- 
piness of the individuals composing them are in the 
ratio in which the laws of nature have been allowed to 
govern their operations, and . . . the poverty, misery, 
and distress that exist are invariably to be traced to 
the interference of man with those laws, and they exist in 
the ratio of that interference";'^^ but thirty-five years 
later we read in "The Unity of Law": "Such is the 
politico-economical science whose . . . every suggestion 
is opposed to that which common sense and common 
humanity teach. . . ." '^" The system supposedly 
grounded on solid premises had led to absurdities, per- 
mitting conditions of life for which Carey entertained 
nothing but contempt. 

His was a confession stronger in words, but not 
more sincere than that of Bastiat on behalf of the mil- 
lions. The belief of this Frenchman that "God has 

''"Ch. 1. 

" Principles of Political Economy, Part I, p. xvi. 

" Page 29. 



184. THE DEVELOPMENT OF ECONOMICS 

placed within each individual an irresistible impulse 
toward the good, and a never-failing light which enables 
him to discern it" "^^ was rudely shaken by the distress 
of the people around him.^* Somehow it became clearer 
as the decades rolled by that the cosmic harmonies created 
nothing but discord among humans. Individualism ram- 
pant had not justified the optimism of an earlier age, for 
misery was real and widespread. Over-population was a 
fact, not a myth of the philosopher. Crises and years 
of depression went over western Europe again and again, 
at not too long intervals. A proletariat had emerged 
out of the industrial revolution that was hostile to Let- 
Alone policies and eager for betterments. Political 
rights were demanded and yet, upon use, found an insuf- 
ficient protection against ills that the organization of 
production and exchange somehow gave rise to. Legis- 
lators felt the need of heroic efforts to appease the mul- 
titudes, and theorists were impressed with the breach 
steadily widening between what they preached and what 
grim reality proved. Economics apparently would either 
have to revise many of its definitions and arguments within 
the limits set, or else start over again from altogether 
new premises. 

The issue was clear, but the outcome unpredictable. 

" Harmonies Economiques. 

''* For a criticism of Bastiat and a clear distinction between economic 
expediency and abstract justice see Cairnes, J. E., in Some Leading Prin- 
ciples of Political Economy Newly Expounded, 1874, p. 269. 



CHAPTER SIX 
HISTORISM 

Idea of Collectivism. — The Historical School among 
economists became a power to reckon with during the 
sixth decade of the last century, that is, about the time 
that Utilitarianism had reached the apogee of its fame. It 
might, therefore, seem strange that the two should be 
virtually contemporary if we didn't know that the His- 
torical movement, or — to give it a brief name — Historism, 
was as much a reaction against Smith's Naturalism as 
against the Ricardo-Mill group, while furthermore His- 
torism was continental in its origins and hence not likely 
to agree with British Utilitarianism in any form. 

To the founders of the Historical School so-called, which 
was represented at first by a mere handful of men. Nat- 
uralism and Utilitarian economics were substantially one 
— a view one can hardly condemn once the Historical out- 
look is properly understood. There was no doubt that 
the two earlier economic systems showed important re- 
semblances, in that both built on individualism, on a 
static notion of life, on premises generally speaking that 
yielded conclusions altogether distinct from actualities. 
Whatever the differences between Naturalists and Utili- 
tarians, or between members within the latter group — 
and they were not inconsiderable — they did offer a united 
front in their treatment of Historical critics. They in- 
sisted upon the universal validity of their theorems, con- 

185 



186 THE DEVELOPMENT OF ECONOMICS 

vinced that after due allowances had been made almost 
any case could be judged by their principles. 

Now, the Historical School objected to this way of 
dealing with a difficult subject. Its adherents felt that 
things were not as simple as they seemed, that super- 
ficiality was frequently mistaken for mastery, and mere 
logic of reasoning for verification in the concrete. The 
nonchalance and gruff indifference of Utilitarians to eth- 
ics was deplored as something beneath social science. At 
all events, it was argued, much remained to be done if 
the misery of the masses was not to increase, thanks to 
those very gentlemen of hedonistic leanings. 

One group stressed collectivism without having re- 
course to an historical doctrine; the other gave all facts, 
and economics particularly, an historical setting, but in 
doing so championed collectivism no less than the first. 
All members of the Historical School were collectivists, 
but the converse did not hold, though the majority of 
collectivists did employ the historical method as every 
student of socialism, Utopian and scientific, is well aware. 
We might say therefore that collectivism is the broader 
term, with the understanding, however, that Historism 
is not thus accused of narrowness in any other sense. 
For no matter how one may finally appraise the achieve- 
ments of the Historical Movement, there is no doubt 
of the salutary effects it had upon social science. 

Collectivism stood for a more or less definite concept 
of public welfare, for an emphasis on the differences be- 
tween men, the interdependence of functions and rights 
among individuals, the relativity of good and evil, or 
truth and error, for the opposition of self to social in- 
terests, and the rationality of control over citizens by 
a central authority. Historism, in its turn, represents 
the habit of looking back for an explanation of existing 



HISTORISM 187 

ideas or institutions. A belief in change and motion as 
an eternal factor in human experience, the idea of rela- 
tivity just as collectivism dealt with it, and finally the 
search for repetitions which somehow might justify the 
formulation of rules — such were salient features in 
Historism. Actualities outside, and the need for ap- 
plications were both constantly kept in mind. Whether 
there was a purpose back of this vast phantasmagoria 
of history in the making, or of history already made, 
not all collectivists or historians were willing to say. 
For instance some of the French, English, and Ger- 
man Utopians and less radical critics of Utilitarian eco- 
nomics frankly preached theism, convinced that God 
must right things, that history moved in a definite direc- 
tion, or that even in a static view the hand of Providence 
could not be ignored. Yet the greater number of col- 
lectivists of both shades left the question unanswered. 
The aim was to be scientific as truly as the Utilitarians 
had professed to be, with a similar disdain for metaphysics 
and a bold assumption that the facts themselves, if care- 
fully collated, would furnish the clew to all riddles. 

What the two movements, the coUectivistic in the wider 
and the Historical in the narrower sense, had in com- 
mon was a violent antipathy to the hedonistic premises 
of Utilitarianism, to the whole scheme of Smith and 
the Ricardians for an individual measurement of legal 
and moral rights. Not the self, but society, not one but 
all, not a class but the entire nation, and perhaps not 
even any one nation, but rather mankind in the lump, 
such were the contrasts made by the rebels in economics. 
Done with Absolutes, this was one slogan! Eighteenth 
century empiricism and materialism revived for new pur- 
poses. As the Baron d'Holbach had written in his "Na- 
ture and Her Laws as Applicable to the Happiness of 



188 THE DEVELOPMENT OF ECONOMICS 

Man Living in Society'^: "Man will ever remain a mys- 
tery to those who obstinately persist in viewing him 
with eyes prepossessed by metaphysics ; he will always be 
an enigma to those who shall pertinaciously attribute his 
actions to a principle of which it is impossible to form 
to themselves any distinct idea." Transcendentalism, so 
Saint Simon declared, was the bane of thinkers who 
sought light on social problems. 

But furthermore, ethics itself could not be posited 
safely on anything but an empirical view of life. Man 
and his actions in company with fellow beings must fur- 
nish the key to right and wrong. A moral code de- 
pended on studies that had nothing to do with the rumi- 
nations of a closet philosopher. Hence economics must 
include more than the exchange system of any given time 
or place. The science that hoped to measure values and 
describe accurately, for long periods to come, the process 
by which wealth was produced, distributed, and con- 
sumed could not confine its investigations to a pecuniary 
world; for marketing was not the whole of intercourse, 
nor earning money the sole proof of production. Eco- 
nomic laws, consequently, were invalid if not related to 
the social process as a whole. A much greater multi- 
plicity of events had to be reckoned with than the Utili- 
tarians or Naturalists imagined. Law was born of cir- 
cumstances in time and space. Variability was the only 
thing constant or continuous. Even the premises of 
Utilitarian economics were subject to this revision, as for 
instance the postulate of private property and freedom of 
contract. Why ground a system of economics on an in- 
stitution that might disappear in the course of time, 
indeed which had not always flourished as it does to-day.? 
The coUectivists took note of this possibility and changed 
their reasoning accordingly. "The general opinion 



HISTORISM 189 

seems to be," wrote the authors of the "Doctrine of Saint 
Simon," which came from the press soon after his death 
in 1825, "that whatever revolutions may take place in 
society, this institution of private property must forever 
remain sacred and inviolable, as if it alone is eternal. 
But in reality nothing could be less correct. Property 
is a social fact which, along with other social facts, must 
submit to the laws of progress." ^ 

This is the new attitude adopted by the coUectivists 
of many classes. Economics treats of relative facts, and 
in the end nothing may be more important than an adapta- 
tion of means to a practical policy. Democracy itself 
could not mean much without economic guarantees. To 
have rights for exercise of power must include possession 
of goods whose enjoyment was a prerequisite to other 
abilities. Representation must be supplemented by or- 
ganization, or by Association in a more technical sense. 
The welfare of each lay in cooperation ; thus alone could, 
under guidance of qualified persons, society and the Ego, 
be brought on one plane of thinking. 

Collectivism in France. — Now, this departure from in- 
dividualism. Naturalistic or Utilitarian, had its incep- 
tion in ideals older than the science of economics, or at 
least just about as old. Not the nineteenth, but the 
eighteenth, century laid the foundations. In France the 
collectivistic movement first gained a footing, though the 
weapons it employed were largely of British origin. The 
epoch that rang with the shouts of natural law and nat- 
ural rights gave birth also to the communistic spirit 
of the Revolution. Not that this latter itself stood 
primarily for communism or socialism as later under- 
stood, but that many of the arguments basic to the 

1 Doctrines de Saint Simon, Exposition, 1829, quoted by Gide, Ch., and 
Rist, Ch., in their History of Economic Doctrines, transl. by Richards, R., 
p. 222. 



190 THE DEVELOPMENT OF ECONOMICS 

revolt against the Ancient Regime were adaptable also 
to plans of a distinctively economic nature. The 
Physiocrats honored private property and govern- 
ment. Nothing was farther from their intentions than 
an upheaval such as befell their country in 1789. But 
in siding with the Encyclopedists, in pointing to the 
ethics of nature as against human follies, in describ- 
ing the process by which wealth came and went in annual 
waves, all of it the fruits of the earth, but much of it 
consumed by non-producers — in discussing jurisprudence 
and morals, politics and law, wealth and waste from the 
standpoint of a science whose propositions reigned above' 
monarchs, the French thinkers between 1740 and 1790 
prepared the public mind for sweeping changes. 

Mably might ridicule the Physiocrats, but that only 
bettered the case for reformers. Morelly might struggle 
with adversities, obscure in his own day and little feared 
by the clergy, but his "Essay on the Human Spirit," 
1743, his "Code of Nature," 1755, left their mark upon 
minds at the very center of political affairs ; for in 
Sieyes and Mirabeau the Younger the revolutionists found 
leaders of the first rank. And others rose from the rank 
and file : Babeuf , who declaims : "Perish the arts, but let 
us have real equality." "Let everything return to chaos, 
and from chaos let there rise a new and regenerated 
world"; Barnave, who anticipated many of the ideas 
woven into a materialistic philosophy by Karl Marx! 
And then the utopias of Cabet, Fourier, Simon, and 
Blanc! Industrialism and Association for workmen 
that otherwise must succumb to capital! Solidarism 
as against individualism which, being a free-for-all 
fight, was bound to enslave the masses ! To each man 
.his product, or better still perhaps, like shares to all lest 
some perish by their own hand, a victim of guiltless in- 



HISTORISM 191 

feriorities. Government of a new sort, since the old is 
the antithesis of reason! Or as Saint Simon put it: 
Either government or genius, which do you need most? 
Will Prance die when its functionaries of state are buried, 
or when the inventors and artificers cease producing 
the wealth of nations? Let those who can think pro- 
vide the answer! 

Soon after these several onslaughts upon hallowed tra- 
ditions and moribund institutions comes Sismondi, the 
first after J. B. Say who voices the national demand for 
a clarification of economic theses. But unlike his prede- 
cessor he does not stop at the point where he begins. 
He does not, after his first essay on economics, continue 
along the route originally planned. Events carry him 
to unforeseen conclusions. He changes front and by 
1819, in "The New Principles of Political Economy'* en- 
ters upon a critique of dominant thought such as had 
never come from the pen of any writer before. A real, 
earnest attempt is made to reconstruct economics. The 
title of the work was not inaptly chosen ! 

It is the collectivistic spirit that greets us here and 
gains our friendship. The tone is convincing, and the 
treatment brilliant. Eloquence supplies what in cogency 
of argument is here and there lacking. If it were 
not for interspersions distinctly of his own time, one 
might feel transported back to Kameralism and the ear- 
lier treatises on political science. For the variety of 
things discussed is endless ; the manner of exposition at 
times careless ; logical sequence, such as the Utilitarians 
had cultivated, nowhere in evidence. 

Sismondi — to illustrate the scope and intent of his 
work — gives us his "Principles" in seven Books. The 
first expounds the question of field and method; the sec- 
ond treats of the origin and growth of wealth, of ex- 



192 THE DEVELOPMENT OF ECONOMICS 

change and consumption, including a consideration of 
the relation between the distribution of wealth and pro- 
duction; the third part deals with territorial wealth as 
incorporated in agriculture, slaves, etc. Tenantry, feu- 
dalism, rents, and policies with regard to them engage 
our attention. In the fourth Book commercial wealth 
is discussed, particularly traffic, markets, interest, ma- 
chinofacture, monopolies, and tariffs. In the fifth we 
find theories on money, price-levels, interest, coinage, 
credit, and banking. The sixth takes up taxes and pub- 
lic loans ; while the last has to do with population, em- 
ployment measures, and like steps calculated to benefit 
the masses. At the end of such an enumeration of topics 
one asks: Could anything be more ambitious, or less 
formal after the rigid logical constructions of the Utili- 
tarians ? Surely not ! 

But it was not merely a case of defiantly overriding 
the traditions of an older school. Rather, we must give 
credit also to Sismondi for his originality of conception 
and the completeness with which he anticipated the an- 
nouncements of socialists. Indeed, much of what is com- 
monly associated with Historism will be found in the 
"New Principles" where exuberance of fancy vies with 
breadth of erudition. Thus Sismondi it was who con- 
demns Smith's universalism ; who prefers induction to 
deduction, stating the historical argument at length; 
who stresses the unity of social processes of which eco- 
nomics represents but a part; who connects the latter 
with art and ethics in the belief that art is more fruitful 
than any bare account of facts ; and who says : "Political 
economy at its widest is a theory of charity. Any theory 
that upon last analysis has not the result of increasing 
the happiness of mankind does not belong to the science 
[of economics] at all." 



HISTORISM 193 

To Sismondi public wealth is more important than in- 
dividual income. Cooperation is preferable to competi- 
tion, and this the more so since an unequal distribution 
of wealth has, as he argues, for generations brutalized 
what otherwise might have been a fair contest. What 
else, he queried, could grow out of such inequitable 
conditions than class consciousness, the exploitation 
of labor by capital, and periodic unemployment due 
to the steady encroachment of machinery upon manual 
crafts.? Economics therefore had to be restated in 
conformity with historical and moral data ; or else the 
Utilitarian idea of inexorable laws dividing men into 
task-masters and serfs would precipitate a merciless 
struggle, a disaster indescribable. 

Collectivism in England. — Put differently then, Sis- 
mondi was groping for a theory of prosperity; and in 
this he was not alone. In England, too, even before 
socialism was made "scientific," the conviction was gain- 
ing that something was radically wrong with the orthodox 
doctrine. The French Revolution had set men to think- 
ing, and furnished arguments that here and there are 
welcomed by rebel economists. To free the new science 
from shackles of a recent forging, this was their sincere 
endeavor. 

Godwin for instance, who had started Malthus on his 
inquiry about population, was as opposed to unlimited 
private property as he was convinced of the liberality 
of nature toward mankind. In his "Enquiry Concerning 
Political Justice and Its Influence on Morals and Hap- 
piess," 1793, he wrote: "The present system of property 
confers on one man immense wealth in consideration of 
the accident of birth." . . . "Hereditary wealth is in 
reality a premium expended to retain mankind in bm- 



194 THE DEVELOPMENT OF ECONOMICS 

tality and ignorance." ^ And further, "if luxury were 
banished, the necessity for the greater part of the 
manual industry of mankind would be obviated." ^ So 
here was a program that left little room for the laissez 
faire of approved types! And similarly with the writ- 
ings of economists like Thompson, Hodgskin, Bray, 
and Gray who, while not taken seriously by the domi- 
nant group, nonetheless exerted a visible influence upon 
economic philosophy, especially on the continent. Again, 
later on we encounter in England such champions of 
Christian or ethical economics as Carlyle, Ruskin, 
Kingsley, and Maurice; while among Americans Carey 
might be mentioned as an idealistic protestant against 
Utilitarianism. The approach to the problem diff^ered 
of course according to temperament and technical in- 
terests, but in general the net result was the same: It 
was always a cry against the premises and principles that 
Ricardo had first codified for the benefit of the hedonists. 
Collectivism had a vigorous growth, even if for the time 
being its reception was not cordial. 

Thus, to quote only a few principal writers, Thomp- 
son made it his duty to apply Benthamism in the most 
magnanimous manner possible, by reasoning as follows : 
Maximum happiness for the largest number is the nat- 
ural goal. Any means to this end is justifiable. Now, 
the first condition to its attainment is a possession of 
goods, as Bentham among others had taken pains to dem- 
onstrate over and over ; and owing to the equal capacities 
of human beings to suffer or to enjoy themselves, equal 
income is the first essential to the attainment of the goal 
set. Hence the need of reform in general, and hence the 
necessity of curtailing the privileges of the wealthy! If 

*Vol. II, p. 250. 

»Vol. II, pp. 330 and 344. 



HISTORISM 195 

not equality, the next best thing would be income accord- 
ing to productiveness ; but with a redistribution of prop- 
erty this would of course change, too, some having their 
services valued more highly, and others less so.^ 

Equality, however, had a physical aspect as well as a 
psychological. Not only was it true that "all members 
of society (cases of malformation excepted) being simi- 
larly constituted in their physical organization, are capa- 
ble by similar treatment of enjoying equal portions of 
happiness,'^ ^ but thought itself had a basis admitting of 
quantitative measurements. "What is thought but mo- 
tion produced and felt in the brain.?" "What is labor but 
motion ... in cooperation with the ever-active engines 
of nature ?" ^ The odious comparison of intellectual and 
manual labors, it was said, lacked point because all grades 
of work stood on a level except for differences in de- 
gree. Hobbes and the French materialists were once 
more cited to substantiate this claim. The case for the 
despised masses was exceedingly strong because science, 
in a variety of ways, took the ground from under the 
capitalistic edifice. 

Hodgskin in his lecture on "Popular Political Econ- 
omy," delivered in 1826 and published the next year, 
expanded this argument. He says bluntly: "I can 
understand how a right to appropriate the produce of 
other men, under the name of interest or profit, may be 
a stimulus to cupidity, but I cannot understand how 
lessening the reward of labor, to add to the wealth of 
the idle, can increase industry or accelerate the progress 
of society in wealth." "^ Again : "It is a miserable de- 

* Thompson, W. An Inquiry into the Principles of the Distribution of 
Wealth Most Conducive to Human Happiness Applied to the Newly Pro- 
posed System of a Voluntary Equality of Wealth, 1824, pp. 5, 586, 594. 

* Ibidem, p. 4. For his view on competition see p. 369. 
" Preliminary Observations. 

» Page 254. 



196 THE DEVELOPMENT OF ECONOMICS 

lusion to call capital something saved. Much of it is 
not calculated for consumption, and never is made to 
be enjoyed."^ And further: "All capital is made and 
used by man, and by leaving him out of view and ascrib- 
ing productive power to capital we take that as the 
active cause which is only the creature of his ingenuity, 
and the passive servant of his will." ^ That is, the Mer- 
cantilists were right in calling labor the father of wealth ; 
Smith did well when he put the emphasis upon it rather 
than upon the soil as Physiocratism was wont to; but 
the Utilitarians committed a grievous mistake in adding 
property rights to the list of producers who were en- 
titled to a share of the social dividend. For things, 
though rights from a person's standpoint, could not be 
agents themselves, nor could rights of their own power 
create what was to be distributed, to wit, wealth. Eco- 
nomics, hence, should be redefined so as to include more 
than the exchange mechanism,-^^ lest individualistic norms 
identified production too much with an exercise of mere 
legal rights. The possibilities of meliorism were to be 
studied anew to give everybody a better budget. For, 
we read in Hodgskin's Lectures: "The distress our peo- 
ple suffer, and the poverty we all complain of is not 
caused by nature, but by some social institutions which 
either will not allow the laborer to exert his productive 
power, or which rob him of its fruits. I can never there- 
fore join those political economists who seem to be fond 
of calumniating nature in order to uphold our rever- 
ence for the institutions of man." ^^ 

Karl Marx knew of these works and used them freely. 
He quotes them now and then, and acknowledges his in- 

« Page 255. 
» Pages 246-47. 
" Page 23. 

" Pages 267-68. Similarly Gray, J. The Social System, a Treatise on 
the Principles of Exchange, 1831. 



HISTORISM 191 

debtedness especially to John Bray whose "Labor's 
Wrongs and Labor's Remedy," 1839, spoke strongly for 
a productivity wage.-^^ However, it would be erroneous 
to suppose that the founders of Utilitarian economics 
were heartless sophists who cared nothing about public 
welfare. Their position in truth was simply this : They 
would admit that their premises caricatured human na- 
ture and consequently misled reasoners, but they also 
showed the essential resemblance between them and man 
as a type, while furthermore there was no way of making 
economics a science except by abstracting in a somewhat 
heroic fashion. What was postulated by the Utilitari- 
ans met the facts of the situation by and large; no vio- 
lence was done to experience if it was sufficiently large. 
Hence, doubtless, James Mill saw nothing ironical in 
his statement that "the greatest possible happiness of 
society is attained by insuring to every man the greatest 
possible quantity of the produce of his labor," ^^ the 
measure of productiveness being understood to agree with 
competitive conditions. Yet his son John Stuart as early 
as 1830, if one may take his words in the "Autobiog- 
raphy" seriously, was impressed with the flaws of "the 
old political economy which assumes private property and 
inheritance as indefensible facts, and freedom of produc- 
tion and exchange as the dermer mot of social improve- 
ment." -^^ We know that he projected a work on so- 
cialism and that even in his "Principles" of 1848 he dis- 
plays deep sympathy in the struggles of the proletariat. 
His heart spoke against his reason. He was the chief 
formulator of the Utilitarian logic, but at the same time 

" See, e. g., Marx's Poverty of Philosophy, 1847, translated by Quelch, 
H., pp. 75-82 ; and A Contribution to the Critique of Political Philosophy, 
translated by Stone, N. I., p. 106. These and Marx's Capital, as here 
quoted, are Charles H. Kerr & Co., Chicago, publications. 

i« Essay on Government, in Encyclopedia Britannica, 1820, § 1. 

" Ch. 5. 



198 THE DEVELOPMENT OF ECONOMICS 

packed into his economics ideas and advice utterly for- 
eign to its premises. 

In this respect the later critics were more consistent, 
for they made tabula rasa of the science, admitting noth- 
ing and calling for an entirely new stock of materials. 
Thus Carlyle penned his essays on Chartism and "Latter 
Day Pamphlets"; thus Ruskin made his appeal between 
1860 and 1873, writing "Unto This Last," "Fors 
Clavigera," and "Munera Pulveris," and still more. A 
Christian kind of collectivism was preached that men of 
literary excellence and reputation sponsored with all their 
energy. Thus Carlyle writes: "In brief, all this Mam- 
mon-Gospel of Supply and Demand, Competition, Laissez 
Faire, and the Devil take the hindmost begins to be one 
of the shabbiest Gospels preached ; or altogether the shab- 
biest." 15 

Economics was to become an art rather than a sci- 
ence. "The final object of political economy ... is to 
get a good method of consumption and a great quantity 
of consumption; in other words, to use everything and 
to use it nobly whether it be substance or service or 
service perfecting substance." ^^ Utilitarian economics 
to Ruskin seemed a mere travesty of science. He wished 
to expunge it forever from texts and public records. 
"Observe," he exhorts us, "I neither impugn nor doubt 
the conclusion of the science [economics], if its terms 
are accepted. I am simply non-interested in them, as I 
should be in those of a science of gymnastics which as- 
sumed that men had no skeleton." ^^ Man was more than 
a machine for manufacturing pleasure, and pleasure had 
other sources than those laid bare by eighteenth century 
hedonists. 

^'^ Past and Present : The Working Aristocracy. 
"Ruskin, J. Unto This Last, § 76 and §§ 77-79. 
" Page 2. See also Preface of Munera Pulveris. 



HISTORISM 199 

A like attitude had been taken before also by a few 
German thinkers, as may be seen in Fichte's "Closed Com- 
mercial State," 1800, Thiimen's "Isolated State," whose 
terminal proved to be a socialistic regime, and again in 
Gossen's remarkable "Laws of Human Commerce," pub- 
lished in 1855. However, the force of German collec- 
tivism, viewed either as a protest against Utilitarianism 
or as an independent movement for economic uplift, lay 
not in the chimeras of a Fichte or Gossen, nor even in 
the sober analysis of Rodbertus who, for several reasons, 
respected the rights of business even when he regretted 
their hardness, but in the indefatigable founders of "sci- 
entific" socialism. Rodbertus, while true to Ricardo on 
many questions, admitted the ruthlessness of Utilitarian- 
ism and notably in his "Letters to Kirchmann" defended 
the cause of labor. But his iron-law of wages, his theory 
of the exploitation of the masses, his writings on overpro- 
duction and crises might not have had permanent effects 
if it had not been for the socialists. It was Marx and 
Engels who made capital out of the jeremiads of the 
Prussian bureaucrat. 

Socialism. — Sociahsm in the stricter sense of the word 
was born in 1847, the year of the Communist Manifesto 
upon which followed closely, though of course not as an 
effect, the Revolution of 1848. The roots of the new 
creed, however, must be sought in French naturalism, 
whose mechanistic and materialistic concepts Marx and 
Engels both thoroughly understood in spite of their 
hostility to a static concept; further in British eco- 
nomics ; and still more directly in Hegel's metaphysics. 

English materialism became French during the early 
eighteenth century. The Encyclopedists especially fa- 
miliarized people with the idea of a mechanism covering 
not only the physical, but also the moral world. New- 



200 THE DEVELOPMENT OF ECONOMICS 

ton's system was presented magnificently, and with 
greater lucidity than ever before, by Laplace in his "Ce- 
lestial Mechanism,'^ which appeared at the very end of 
the eighteenth century. As has been shown in an earlier 
chapter, the thought uppermost in the minds of think- 
ers had been for generations the harmonizing of physical 
laws with human will. The principle of continuity had 
been made to render services on behalf of students who 
desired to find a rational explanation of human history. 
Law consequently had become a by-word of experience 
not only for natural but likewise for social scientists. 
There was nothing untoward in Marx's annunciation of 
Determinism. 

Yet one is disposed to believe that socialism would not 
have had such easy traveling if it had not been for the 
German metaphysicians who through Hegel (G. W. F.) 
added the link connecting materialism and historism. For 
so far materialism had been static, while socialists argued 
from a dynamic standpoint. And this is exactly what 
Hegel also preached. His dialectic — itself an outgrowth 
of epistemological and psychological studies — formed the 
nucleus of a logic that purported to unify all mental 
disciplines whatsoever. His idealistic keynote, his pos- 
tulate of an Absolute, his acquiescence in Prussianism as 
an illustrious instance of the Idea of a State — all this 
was but an enigma to men like Marx and Engels. But 
the old Heraclitian concept of an eternal flux and the 
thought of the relativity of things sensed or imagined, 
these were readily understood. What Hegel had said 
about thesis, antithesis, and synthesis in his attempt at 
a logical interrelation of knower and the known, and what 
he himself had developed in other fields, ending with an 
ingenious philosophy of history, this others determined 
to use for an appreciation of present and future. 



HISTORISM 201 

Socialism had no need of a teleological outlook. Con- 
ditions seemed to demand attention not on the part of the 
gods, but on the part of men who knew what they wanted 
and who could cheerfully come to the assistance of nature 
by precipitating what eventually would happen anyhow. 
In this spirit, then, the dialectic of individual learning 
was elevated to a world principle of history. Hegelian- 
ism was stripped of its metaphysics, but the principle of 
relativity, of change everlasting, of the interaction of 
things in a steady progression from past to future, — 
this was left undisturbed. As Engels wrote in his "Anti- 
Diihring" a generation after socialism had been formally 
launched: In Hegel's system "for the first time the whole 
natural, historic, and intellectual world was presented as 
a process, that is as engaged in motion, perpetual change, 
transformation, and development. . . . Viewed from this 
standpoint the history of mankind no longer appeared as 
a wild tangle of senseless deeds of violence . . . which it were 
best to forget as soon as possible, but as a principle of 
the development of mankind, whose gradual march 
through all its stray paths, and its eternal law, through 
all its seeming fortuitousness it now became the task of 
the intellect to trace and discover." ^^ This historical 
concept it was precisely that the older revolutionary gos- 
pel of communism had lacked. Facts apparently inex- 
plicable became as clear as daylight once they were sum- 
marized into a series of interrelated events tending toward 
a definite issue. 

A common sense view, furthermore, was taken of this 
unceasing change of things. Experience was the guide, 
and authority a mere mirror of experience per given 
time and place. The world was real for all the fleeting- 

18 Socialism, Utopian and Scientific, pp. 85-86 (Ch. H. Kerr & Co., 
1917), transl. by Aveling, E. See also the same author's Anti-Duehring, 
p. 10, and his essay on Feuerbach, L, (Kerr & Co.). 



202 THE DEVELOPMENT OF ECONOMICS 

ness of life. What was outside did not originate within, 
as Hegel believed, but on the contrary our ideas were 
a picture of an original all about us. Thus Marx could 
write in his ^'Contribution to the Critique of Political 
Economy," 1859: "The concrete thing continues to lead 
an independent existence after it has been understood, 
just as it did before, outside of the head. . . ." ^^ 
Knowledge therefore did not change by the bare process 
of our finding out, but it became a definite asset for men 
to acquire if they cared. 

And what sort of knowledge could be gleaned from his- 
tory as regards its inner meaning? Well, primarily this, 
that all non-economic phenomena changed with the eco- 
nomic, these latter being the cause or determinant in a real 
sense of the word. "The sum total of these relations of pro- 
duction," Marx tells us in that oft-quoted passage which 
no one can afford to overlook who wishes to understand 
either the philosophical or the economic groundwork of 
socialism, "the sum total of these relations of production 
constitutes the economic structure of society . . . the real 
foundation on which arise legal and political superstruc- 
tures, and to which correspond definite forms of social 
consciousness. The mode of production in material life 
determines the general character of the social, political, 
and spiritual process of life. It is not the conscious- 
ness of men that determines their existence, but on the 
contrary their social existence determines their conscious- 
ness." ^^ And so on. On this account private property 
could be made dependent upon the economic organization 
of society. What was once self-evident might later be- 
come mysterious, nay, an anachronism not to be tolerated. 
Legal ideas on wealth would change sooner or later as 

"P. 293. 

"> Ibidem, pp. 11-12. See also Engel's Socialism, Utopian and Scien- 
tific, Introduction. 



HISTORISM 203 

modes of production changed. The emergence of a pro- 
letariat might render unfit for use a set of laws admirable 
enough when first introduced. Or in the words of Las- 
salle, whose "System of Acquired Rights," 1862, was 
hardly less noteworthy a contribution to socialistic liter- 
ature than his labors as an organizer of men: "Just 
because every age is autonomous, no age can be subject 
to the domination of another, and no age is bound to 
permit the continuance as right of anything that con- 
tradicts its own consciousness of right, or seems to it 
to be wrong." 

Socialistic economics, in short, was based on a theory 
of progress radically different from the utilitarianism of 
the Benthamites. Orthodox economics, in England and 
elsewhere, talked of utility, happiness, human foibles and 
an ever-recurrent sequence of cause and effect, through 
which rates of return, price, and income should gain 
validity and precision. The socialists on the other hand 
took a long-time view and showed how society as a whole 
moved steadily on, the individual not counting at all, 
nor will nor truth, which was as inconstant as the 
social environment whence it sprang. To be consistent, 
therefore, the founders of socialism should have foregone 
a right to interfere in the course of events ; but speaking 
as individuals they admitted the possibility of accelerat- 
ing a natural trend. Hence the economic doctrine; and 
hence the rejection as stupid and selfish of the Utilitarian 
premises. Not private property, but public welfare! 
Not capital, but labor as the decisive element in busi- 
ness ! Not exploitation that must degrade the masses, 
but development of men through control of social sur- 
roundings. 

Competitive concepts thus lost their merit. The legal 
postulates were for the most part condemned or quali- 



204 THE DEVELOPMENT OF ECONOMICS 

fied; the psychological, and in so far as recognized, sub- 
ordinated to the function of training under public as well 
as private guidance. Instead of value, wealth; instead 
of factorial shares, personal income; instead of diminish- 
ing returns, a reapportionment of the funds now con- 
centrated in the hands of a few ; instead of maximum pro- 
duction, hygienic consumption and self-realization ; ^^ in- 
stead of class conflicts, international solidarity. Such 
were the ideals of the socialistic economics which, derived 
from an ever-active law of progress, aimed at the sub- 
version of the existing order. 

The socialists, somewhat after the manner of Saint 
Simon, but relying more upon the arguments of Ricardo, 
Rodbertus, and truants like Hodgskin, applied their 
economic interpretation of history to current customs. 
They wished to show how value was caused and measured 
by labor. They resented the spoliation of the many by 
the few. They traced unemployment and pauperism 
back to machine-production and the resulting periodic 
panics. They predicted the demise of capitalism by sui- 
cide, as it were, that is as something sure to end pre- 
maturely because of the methods employed by the entre- 
preneur in crushing his weaker rivals. Economic in- 
dividualism was sure to perish, it was said; science 
and concerted action could only precipitate the end. 
Subsistence wages would then disappear, and inven- 
tion promote a cordial partnership between all grades 
of labor. For, as Hodgskin, Bray and others had re- 
marked: All kinds of labor differed only in degree of 
effectiveness. Labor alone could create wealth. "All 
economic goods," according to Rodbertus, "are sim- 
ply the result of labor. Their cost is purely labor- 

°* See for instance Marx's Critique of Political Economy, p. 279. 



HISTORISM 205 

cost.'' ^^ . . . "That which determines the magnitude of 
the value of any article," wrote Marx in his "Capital," 
1867, "is the amount of labor socially necessary*" , . . 
"to produce an article under the normal conditions of 
production, and with the average degree of skill and in- 
tensity prevalent at the time." And "each individual 
commodity ... is to be considered as an average sample 
of its class." ^^ 

As for capital it "does not consist in the fact that 
accumulated labor serves living labor (-power) as a 
means for new production. But it consists in the fact 
that living labor serves accumulated labor as the means 
of preserving and multiplying its exchange-value." ^* 
Property rights, that is to say, bring riches where none 
should be.^^ A social relation is abused and made sub- 
servient to vile motives destructive of the social fabric. 
Nothing can save the expropriated multitudes except 
a universal law whose workings are clear to any im- 
partial mind. The value of economic analysis is its 
ability to gather under one formula myriads of par- 
ticulars which, for any given moment of time, must seem 
senseless. Economics, in fine, is the science of wealth- 
phenomena as history reveals them, the fundamentals of 
human nature and the virtues or truths of the day being 
intelligible in no other way. What is regular is the de- 
pendence of all human expressions upon an economic sub- 
stratum. The rest is of no consequence. 

Relation of Socialism to Historical School of Eco- 
nomics. — Historism in the narrower sense of the term 
agreed with this main point of the "scientific" socialists. 

" Letters to Kirchmann, 1850. 

2^ Vol. 1, p. 46. For earlier expressions of like tenor see Marx's 
Poverty of Philosophy. 

2* Marx, K. Wages, Labor, and Capital, publication of Ch. H. Kerr & 
Co., Chicago, pp. 36-37 and 41. 

25 Capital (Kerr publication in three volumes), vol. 1, p. 342. 



206 THE DEVELOPMENT OF ECONOMICS 

It was maintained from the first that the laws of social 
science should be built out of data scattered over a large 
period of time, the circumstances and names varying, 
but the relations observing definite principles which could 
be discovered the more surely, the more numerous the 
facts compared. The Historical economists, in their own 
words, wanted an historical interpretation of economics, 
just as the socialists wanted an economic interpretation 
of history. The former took the unity of the economic 
process for granted, but desired to explain its meaning 
by the comparative method; the latter started with a 
general historical concept, and hoped to find in one as- 
pect the clew to all others. The difference is great and 
hardly suggested by the phrases which sound somewhat 
alike; however resemblances exist nonetheless and His- 
torism without collectivism of the socialist sort would 
have been an odd product, a flash out of the clear sky 
that one can imagine but has not seen. 

Of course, it is easy to exaggerate the intellectual af- 
finity between socialism and Historism, as men from both 
camps have pointed out in a spirit of self-defense. There 
is no doubt that Historism was national, while socialism 
aimed at internationalism. Again, the former made no 
pretense of having discovered the formula of which all 
individual economic laws should be but illustrations, a 
claim made early by Marx and Engels and upon which, 
in addition, they grounded their demand for socio-eco- 
nomic reform. And once more, much of the Utilitarian 
economics, in substance no less than in form and nomen- 
clature, was adopted by the Historical School, the de- 
partures being due to a rather typically German interest 
in Kameralism and foreign policies. 

But hardly anything of the Ricardian scheme could 
suit the founders of socialism. It was not to expound 



HISTORISM 207 

the laws of science that they quoted the British ortho- 
dox writers, but in an endeavor to refute them, to 
expose to ridicule the arguments of capitalism, or to 
stigmatize these cold-blooded treatises, as a mere de- 
ception of the common people. In view of such marked 
opposition between the two groups on a number of counts 
it would be an injustice to couple them too closely. How- 
ever, there remains the fact that they united in a con- 
demnation of the individualistic regime and meant hon- 
estly to create a new science of society. Historism no 
less than socialism was intent upon framing laws of re- 
form conformable to a general theory of prosperity. 
Economics was to have practical bearings. The ethical 
norms were to receive due care. The past with its mis- 
takes was to enlighten the future. New standards of 
manhood from a new knowledge of human nature! A 
wider outlook for a more specific purpose ! Applications 
in politics which to a Utilitarian economist could only 
seem needless or contrary to laws eternal. 

Historism borrowed some of its ideas from socialistic 
economics in order to accomplish these cherished tasks. 
Its literature abounds in references and allusions to 
works and ideas found in French collectivistic writings, 
in utopianism, and in the works of Karl Marx or his 
disciples. Not by accident German Historism culminated 
in the founding of the League for Social Reform, in 
1873 ! Hardly surprising that the Socialists of the 
Chair in the universities were in close touch with the 
Historical group ; or that the same fusion of sociology 
and economics noticeable in Marx also serves as a comer- 
stone of Historism! When utopianism became "scien- 
tific," theorems had to be announced that Roscher and 
Knies could ill afford to neglect. 

Roots of Historism. — Yet the outstanding note of His- 



208 THE DEVELOPMENT OF ECONOMICS 

torism, namely its historical mindedness, was not sounded 
first by the socialists. It antedated their campaign by 
a century or more. It goes back to a philosophy of life 
originally derived from metaphysical questions, and 
gradually made to converge upon a single field: The his- 
tory of society. Vico in 1725 had published his "Prin- 
ciples of a New Science" in this spirit. The works of 
Montesquieu, Voltaire, Turgot, Condorcet, and Condillac 
continued the search for a law of progress, English and 
German writers developing a science of history-writing 
whose excellence has since inspired other nations. In 
England Gibbon gave to the world the first volume of his 
"Decline and Fall of the Roman Empire" in 1776, the 
year that Smith published the "Wealth of Nations," and 
Bentham his "Fragment on Government." In Germany 
Lessing wrote on the "Education of the Human Race," 
1780, while Herder soon afterwards began his "Ideas on 
a Philosophy of the History of Mankind." What with 
the labors of the professional historians, whose publica- 
tions set a new standard of research at the turn of the 
eighteenth century, and the philosophical works of Kant, 
Goethe, Fichte, the two Schlegels, and Krause, whose 
"True Lesson and Philosophy of the History Applicable 
to a Science of Right Living" (1815-25), appealed to 
large audiences, — what with this fostering on all sides 
of the historical outlook its application to economic prob- 
lems might have been expected. In France economics and 
history had already been combined by Sismondi and 
Cousin, the latter a Hegelian who on his return from 
Berlin infused new vigor into French philosophy. Buchez 
wrote one of the first popular books on the science of 
historiography in 1833, while Guizot, Michelet and 
Thierry wrote masterpieces that brought the past back 



HISTORISM 209 

to life again, a guide for the present, a mirror in which 
to read the soul of Frenchmen great and little. 

And then there was Comte, the founder of social 
physics or sociology, as he later christened it. Comte, 
who had epitomized history in his three stages of devel- 
opment, the theological, metaphysical, and positive or 
scientific, and in whom the idea of continuity, interaction, 
and human control governed everything else. In place 
of divine guidance, the will of man ! As an improvement 
on intuition, reason armed with knowledge ! For the sake 
of progress, one social science resting on all others, but 
to be perfected only by exhaustive inquiry into social 
phenomena past and present. 

German Historism had these thoughts and works to 
fall back on for a systematization of its own concepts. 
It was surrounded by men who studied and taught his- 
tory in and out of university. The followers of Niebuhr 
and Ranke, Savigny and Eichhorn, Bopp, and the 
brothers Grimm, of Schlegel and Hegel furnished invalu- 
able material for an historical approach to economic sub- 
jects. Besides, the evolutionary viewpoint was rapidly 
making headway. The biological aspects were worked 
out by Lamarck and Agassiz, Alexander von Humboldt 
and Erasmus Darwin, whose son Charles started on his 
memorable voyage aboard the "Beagle" in 1831. In 
1855 H. Spencer and A. Wallace announced some of the 
ideas basic to all evolutionary thinking, and four years 
later appeared Charles Darwin's "Origin of Species," 
the result of thirty years of research in many climes. 

Economic Historism was an offspring of this larger 
movement for a dynamic interpretation of life, though 
it may and has been denied that the example of the 
German jurists Eichhorn and Savigny exercised any 



210 THE DEVELOPMENT OF ECONOMICS 

direct influence over it.^^ The idea of a change of 
beliefs or of institutions, and of the environmental 
basis of all theory did not at any rate have to be 
taken from the German professors either at Gottingen 
or elsewhere, for as shown the data had long been 
accumulating on the continent, and to a certain ex- 
tent in England. It remained only to organize various 
reactions against the static Utilitarian or Naturalistic 
economics into a creed at once intelligible to the gen- 
eral public and satisfactory from a methodological 
standpoint. And this the Historical group of German 
economists undoubtedly tried. They improved vastly on 
the half-historical attempts of Galiani,^''' the critic of 
the Physiocrats, and of later French writers like 
Ganilh.^^ *rhey profited by the Romantic school of lit- 
erateurs and philosophers whose fervid devotion to things 
medieval has a parallel only in the philological field 
where laws of growth and semantic changes gave a new 
meaning to modern language. Roscher,^® the acknowl- 
edged pioneer in economic Historism, credits German 
economists like Krause, G. F., Rau, H., Baumstark, E., 
and Schmitthemner, F., with the initial move toward the 
new construction. 

Friedrich List, whose "National System of Political 
Economy" came from the press in 1841, but was con- 
ceived and planned during the preceding decade, was 
an advance agent for the Historical cause, fortifying 
his arguments for nationalistic economics and commercial 

*• For instance by Menger, C, in his Untersuchungen iiber die Methode 
der Sozialwissenschaft, 1883, pp. 209-12. 

^ Dialogues sur le Commerce des B16s, 1770. Galiani was Neapolitan 
minister at Paris. 

2» Inquiry into the Various Systems of Political Economy . . . , one 
of the first topically arranged histories of economic thought, with critical 
commentary on A. Smith's Wealth of Nations, edition of 1812, transl. by 
Boileau, D. 

^^^ Grundriss zu Vorlesungen iiber die Staatswissenschaft nach Ge- 
schichtlicher Methode, 1843. 



HISTORISM 211 

protection with innumerable references to past theories 
and practices. 

He opens his book with a survey of economic develop- 
ments in different European countries, and is not igno- 
rant of economic doctrines from Mercantilism on. 
"History teaches us," he says, "how nations which have 
been endowed by Nature with all resources which are 
requisite for the attainment of the highest grade of wealth 
and power, may and must — without on that account for- 
feiting the end in view — modify their systems according 
to the measure of their own progress. . . ." ^^ Cosmo- 
politanism and Malthusianism both were rejected as un- 
true to facts. The historical criterion was definitely 
brought forward as alone adequate for sound economic 
analysis. "The present state of the nations," we read, 
"is the result of the accumulation of all discoveries, in- 
ventions, improvements, perfections, and exertions of all 
generations which have lived before us ; they form the 
mental capital of the present human race. . . ." ^^ 

As happens so frequently then, in this case, too, credit 
is given to the wrong man. There is not a great deal 
in Historism that List had not presaged in his modest, 
though enthusiastically received, plea for German in- 
dustrialism. Utilitarian universalism, materialism (in 
the ordinary sense, meaning egoism and indifference to 
the higher non-economic values of life), individualism 
and narrowness of treatment,^^ these were the defects 
mainly attributed by Historism to the current economic 
system, and these List pointed out several years before 
Roscher published the first part of his "Principles of 
Political Economy" in 1843. We are told of economic 
stages from hunting to machinofacture, of the interrela- 

8" Translation by Lloyd, S. S., edit, of 1904, Book I, ch. 10. 

"Ibidem, Book II, ch. 12. 

32 Ibidem, Book II, ch. 15, beginning. 



212 THE DEVELOPMENT OF ECONOMICS 

tion of all social events, of the absurdity of wealth- 
measurements from an individual viewpoint only, of the 
difference between rights to income and concrete wealth, 
of the priority of public over personal rights, of the 
need of inference from the facts of life, the best book 
on economics being "actual life," and of the necessarily 
national character of doctrines, be they economic or 
not. Commercial restrictions, for instance, are to List 
"not so much the inventions of mere speculative minds, 
as the natural consequences of the diversity of interests, 
and of the strivings of nations after independence or 
overpowering ascendancy . . . and therefore cannot be 
dispensed with until this conflict of national interests 
shall cease, in other words until all nations can be united 
under one and the same system of law." ^^ Again, the 
British system failed because "at bottom it is nothing 
else than a system of the private economy of all the 
individuals of the whole human race, as that economy 
would develop and shape itself under a state of things 
in which there were no distinct nations, nationalities, or 
national interests — no distinctive political constitutions 
or degrees of civilization — no wars or national animosi- 
ties. So it is nothing more than a theory of values ; a 
mere shopkeeper's or individual merchant's theory — not a 
scientific doctrine showing how the productive powers of 
an entire nation can be called into existence, increased, 
maintained, preserved — for the special benefit of its 
civilization, welfare, might, continuance, and indepen- 
dence." ^* 

Doctrines of Historism. — Here certainly we are re- 
minded of facts that Historism later built into systems of 
national economy. Economics by Roscher, Hildebrand, 

" Ibidem, Book I, ch. 10. 
"Ibidem, Book III, ch. 31. 



HISTORISM 213 

Knies and their followers up to the dawn of the present 
century was grounded on the principle of historical con- 
tinuity and repetition. It became the "science which has 
to do with laws of development of the economy of a 
nation." ^^ It blossomed out into a philosophy of history 
in which successive stages of economic organization and 
living were to divulge the secrets of social life.^^ Like 
socialism Historism reckoned by epochs, the economic 
data of each providing the key to the solution of many 
other, if not all other, problems. And more particularly, 
as Knies put it in his "Political Economy from the His- 
torical Standpoint" (the first edition of which appeared 
in 1853) : "The historical interpretation of economics 
rests on the belief that economic theory is a product of 
development, is intertwined with the whole social organism 
of any given time and place and its circumstances, gets 
its arguments from the historical background, leads to 
periodically changing solutions — though it is a progres- 
sive manifestation of truth — remains imperfect in sum 
and character, and always, even when accepted as abso- 
lute truth, illustrates merely the general historical prin- 
ciple of the spirit of the times." ^'^ ^ 

In this vein Leslie, the Irish economist, could write: 
Only the historical method can reveal laws of evolution. 
"Every successive phase of social progress presents insep- 
arably connected phenomena to the observation of the 
economist, jurist, the mental, the moral, and the political 
philosopher." ^^ With impressive unanimity the Histori- 

'5 Roscher, W., Principles of Political Economy, transl. by Lalor, J. J., 
from the 13th German edition, vol. 1, ch. 2, § 16. 

^^ See Hildebrand, B., in Jahrbucher fiir National okonomie und 
Statistik, for 1863, vol. 1. 

" Pages 24-5 of Politische okonomie vom Geschichtlichen Standpunkt, 
1881-83. 

^8 Leslie, Th. E. C, Essays on Political Economy, pp. 189-90. See 
also Schoenberg, G., Die Volkswirtschaft der Gegenwart, 1869, p. 38. 
For a recent attempt at a summarizing of the essentials of human history 
see Loria, A., Economic Synthesis, transl. by Paul, M. E., 1914. 



214 THE DEVELOPMENT OF ECONOMICS 

cal group in England, Germany, and Italy agreed on 
these fundamentals of economic analysis. Centuries of 
history were to show what introspective psychology could 
not. 

Historism thus took a sociological view of human 
nature. It declined to rest content with speculations 
privately conducted. It looked for a unit larger than 
the individual and found it in the society of all ages. 
Saint Simon and Comte had first used this conception 
for the elaboration of a theory of progress. The latter 
especially had emphasized the force of ideas as opposed 
to man's subjection to physical environment. He that 
left psychology and economics out of his classification 
of sciences was most instrumental in having them recog- 
nized as essentials for his own science, sociology ! Society, 
he taught, was a single unit reflecting in its laws of 
statics and dynamics the Newtonian laws of motion. 
Nothing could be plainer than that the heterogeneity of 
events was reducible to homogeneity of law. For were 
not all parts interdependent as in an organism? Was 
not society really a body politic as Aristotle had divined 
and Hobbes picturesquely described it? 

The organic nature of society and of the state seemed 
to find support notably in statistics as developed about 
this time. From small beginnings in the previous century 
this branch of investigation had grown to large propor- 
tions due directly to official records and indirectly to 
individual speculations on probability and law. The 
studies of Fermat and Bernouilli were supplemented by 
such works as Laplace's "Philosophical Essay on Proba- 
bilities," 1814, and Cournot's "Discourse on the 
Theory of Chance and ProbabiHty," 1843. The Italian 
economist Gioja had in 1826 published his "Philosophy 
of Statistics," and A. A. Knies in Germany his "Statistics 
as an Independent Science" about the middle of the nine- 



HISTORISM 215 

teenth century. Governments had established statistical 
bureaus with more or less well-defined duties, methods, 
and machinery for work ; and in the genius of La Grange, 
Gauss, and the Belgian Quetelet the statistical method 
found authoritative expression that economics was not 
likely to forget. Wagner indeed, one of the foremost 
German economists of the later Historical group, opened 
his professional career with a book on "Regularity 
(Gesetzmassigkeit) in . . . Human Actions,'* 1864. 

But it was Quetelet who gave the science of statistics 
— if one may for the moment grant the possibility of 
such a science — a solid foundation. His "Treatise on 
Man," 1835, was translated into German as early as 
1838, and into EngHsh in 1842. His "Letters on the 
Theory of Probabilities" cause widespread comment, and 
his "Social System and the Laws Regulating it" ap- 
peared in German dress by 1856. He chose as his life 
work the inquiry into those "causes, whether natural or 
abnormal, which influence human development; to en- 
deavor to measure the influence of these causes, and the 
mode according to which they mutually modify each 
other." ^^ He felt that economics might deal with hu- 
man regulations designed to further progress, but that 
social physics, i. e., sociology and statistics, would voice 
the wish of God, no matter what the nature of disease or 
crime. For "moral phenomena, when observed on a great 
scale, are found to resemble physical phenomena," ^^ and 
society, "this vast body, exists thanks to laws of nature 
like everything else from the hand of the Great Creat- 
or." ^^ He insisted that society "is as much a piece of 
physiology as individual man himself." *^ Regularity 
therefore had a reason in facts of analogy as well as a 

" Treatise on Man, transl. into English in 1842, p. 8. 

*» Ibidem, Introduction. 

*^ Lettres sur la Th6orie des Probabilites. 

** Ibidem. 



216 THE DEVELOPMENT OF ECONOMICS 

source of verification in a science of averages whose 
accuracy would be the greater, the larger the number of 
events taken into consideration. 

Now this idea of interaction at all points, of law 
superseding freedom of will as ordinarily understood, 
served Historism in good stead, giving a semblance of 
truth not only to the organic theory of society, but also 
to the contention that economics was an inseparable part 
of sociology. We find therefore Roscher declare in his 
"Principles of Political Economy": "Our task is, so to 
speak, the anatomy and physiology of social or national 
economy." ^^ The physiological viewpoint necessitated 
an inductive method and justified a reliance upon statis- 
tics. In Knies the same idea of an immensely complex 
process of interactions between individuals recurs again 
and again. Society as an organism whose unity every 
scientist should respect is contrasted, in the words of 
Hildebrand, with "the atomistic view of human and civic 
bodies" ^^ which utilitarian economics made the basis of 
its speculations. In reality society is both more and less 
than the sum of individuals composing it; it would de- 
pend upon viewpoint and classification of essential 
traits."*^ To narrow down economics therefore to a 
science of exchange relations within a larger field, all of 
which was traversed in different directions by the mem- 
bers of society, seemed to men like Leslie Stephen,** 
Ingram,*"^ L. v. Stein,*^ and SchmoUer,*^ a vain attempt 
at dodging responsibilities. Economists were but cheat- 

*' Lalor's (J. J.) translation, ch. 3 of Introduction. 

** Nationalokonomie der Gegenwart und Zukunft, pp. 29-30. 

** See also Knies, K. Politische okonomie vom Geschichtliehen Stand- 
punkt, 1883, pp. 24-5. 

*« See e. g. his Tlie Sphere of Political Economy, one of the addresses 
reprinted in his Social Rights and Duties, 1896 (Swan, Sonnenschein & 
Co.), vol. 1, p. 105. 

*'' Ingram, J. K. History of Political Economy, 1888, eh. 7. 

*^ Lehrbuch der Nationalokonomie, 1886, 3d edit., p. 4. 

** Grundriss der Allgemeinen Volkswirtschaftslehre, 1901-04, vol. 1. 
See also Ely, R. T., and collaborators in Outlines of Economics, 1909, 
p. 12. 



HISTORISM 217 

ing themselves out of treasures rightly theirs, if they 
broke away from sociology. The forces of nature, of 
human nature in this case, would mock the specialist's 
rules. 

But since unity was the most striking feature of all 
social life it became furthermore necessary to combine 
ethical with matter of fact judgments. ^^ It was entirely 
out of the question to record calmly what was happening 
and why, as though laws eternal would allow no deviation 
from the customs of the moment, and then to base policies 
on them regardless of moral values. Historism took 
exception to the notion that a mere distinction between 
things as they are and things as they ought to be elimi- 
nated the latter out of the economist's program. The 
original Utilitarian view that the "economic man" was 
at the same time moral, and inevitably so because the 
pursuit of pleasure is the only test of a love of virtue, 
was never fully understood on the continent, or at least 
not among the economists. So here was one point of 
dissension to bear in mind. However, in the second 
place, Historism was essentially an ethical movement 
descended from German transcendentalism in psychology, 
logic, and ethics. Empiricism was not supposed to 
provide an answer to questions of the Is and Ought. 
It was agreed among the Historical writers that ethics 
has a task of its own, and may impose its standards 
upon others just as surely as economics might counsel 
the legislator. Indeed it was argued that applications in 
economics had no real standing until moralists approved 
of them. Without exception the plea of Historism was 
for an ideal of progress, for the acceptance of a moral 
norm, for the subordination of economic principles to 

"'•For evidence see works just mentioned, and also Schmoller's (G.) 
paper on the Idea of Justice in Political Economy, in Annals of the 
American Academy of Political and Social Science, 1893-94, pp. 697-737. 



218 THE DEVELOPMENT OF ECONOMICS 

the Absolute in ethics, that contrasted strangely with 
the easy optimism of Naturalistic and Utilitarian 
economics. 

The difference arose mainly from two causes. For in 
the first place human nature was less simple to the His- 
torical group than to their predecessors; and in the 
second place types of men were distinguished so as to 
account for the antagonism between individual and so- 
ciety. The divergent interests had to be reconciled some- 
how. It could be done by wise management of human 
nature and physical resources. But it seemed folly to 
trust everything to personal enterprise, as if in each man 
there was a rough balance of good and evil, whose aggre- 
gate effects would be conducive to order and progress. 
Historism saw differences between men as the eighteenth 
century had not seen them. It relied more upon moral 
teachings and public control, and less upon innate good- 
ness or Divine Providence. 

At the same time it was acknowledged that human 
selfishness was less imperious than the Benthamites had 
tried to make out. The differences in motives were shown 
to be so great as to preclude their reduction to one or 
two. Desire for wealth in particular was given less 
prominence than perhaps even the casual observer would 
have liked. The hedonistic premises were scouted as being 
phantastic and unjust to man. Most of the methodologi- 
cal essays of Historism, in England as much as in Ger- 
many, dwelt on this superficial analysis of the human 
mind. It was held that either the Utilitarians did not 
want to know human nature, or else that they were car- 
ried away by the spectacle of business men seeking forever 
least pain for most pleasure, as if that were all they 
thought of. In other words, man once more was credited 
with many aptitudes and designs, only a few of which the 



HISTORISM 219 

older economics had considered in its quest for universal 
laws. 

The "Socialists of the Chair" in Germany, whose logic 
and nomenclature was not Historical, but whose ethics 
blended nicely with that of Historism, seconded this move 
for a moral regeneration of their science. In fact, their 
outlook in noteworthy respects resembles that of a 
Roscher and Schmoller, for one thing because they stressed 
the relativity of economic truths from the historical 
and the logical standpoint, and for another thing on 
account of their nationalistic temperament. Wagner, 
Brentano, Cohn, Conrad, Held, and Neumann are names 
ever to be associated with Historism, even if UtiHtarian 
and Marginal concepts found a place on their analysis 
of price. It is characteristic, e. g., that Wagner in his 
"Outlines of Political Economy," 1892, classifies human 
motives into egoistic and non-egoistic, subdividing the 
former as follows: first, the desire of wealth and the 
dread of want (poverty) ; second, fear of punishment and 
hopes of reward; third, love of approbation and of 
power; and fourth, wish for something to do — ^what in 
the phrase of Veblen would amount to "instinct of work- 
manship." ^^ In such analysis of human traits, in the 
emphasis of legal relations as a postulate for economics, 
in a high regard for the stuff-aspects of wealth, in the 
inclusion of consumption as an integral part of economics, 
— ^in these and other points Historism had excellent 
spokesmen among the founders of the "Verein fiir Sozial- 
Politik." Both tried to forget the psychological roots 
of British Utilitarianism; both aimed at a dynamic in- 
terpretation of social events ; both wanted education to 
change the organization of production; both assigned to 

" Grundlegung der Politischen Okonomie, 3. edit., vol. 1, p. 87, 



220 THE DEVELOPMENT OF ECONOMICS 

the State duties that Manchestrianism had considered 
worse than futile. 

Historism in particular dwelt on the importance of 
public control because through it Germany was expected 
to recover from the blows of the Napoleonic period. At 
the beginning of the nineteenth century Germany was no 
farther along the road of industrial reorganization than 
England at the time of the "Wealth of Nations." The 
need of an awakening was felt by discerning folk every- 
where. A cry went up to bring the fatherland back to 
its days of glory and might. The middle classes labored 
as strenuously for a firm policy at home and abroad as 
the lower classes pinned their faith in the downfall of 
capitalism. The Utopian and socialistic waves went over 
the land, welcomed as a deliverance from the adamant 
laws of Utilitarianism. The masses cared little for na- 
tionalism as long as capitalistic pressure kept them down. 
The leaders of scientific socialism not only scorned peti- 
tions for redress, or measures for national aggrandize- 
ment, but condemned the whole social order which was to 
be saved by this appeal ad hommem. No nationalism, 
was their slogan! 

Against this kind of corruption, then, Historism 
sought protection in strong internal policies. Not only 
that Laissez Faire had proven a partial failure in Eng- 
land, not only that Smithian arguments rested on as- 
sumptions inadmissable by modern psychology, not only 
that the historical view suggested a change of front 
whenever conditions and aims changed, but also that 
centrifugal forces within German borders had to be 
watched if race and righteousness were to survive. Hence 
Customs Union and paternalism went hand in hand. 
Hence the fiasco of the stormy days of 1848 cheered men 
both of liberal and of conservative temperament. Hence 



HISTORISM 221 

the solicitude of Historism for a peaceful, well-balanced 
plan of welding the hostile classes into one great nation. 
Proletariat and plutocracy were to join in a nation- 
wide campaign for the unification of all German peoples. 
From Roscher on this concern for the national aspects 
of economics became noticeable and achieved results fa- 
miliar to the outside world. It was Roscher who thought 
that economics "inquires how the various wants of the 
people of a country . . . may be satisfied; how the satis- 
faction of these wants influences the aggregate national 
life, and how in turn they are influenced by national 
life." ^^ In his opinion, as in that of all his successors, 
"goods are anything which can be used whether directly 
or indirectly, for the satisfaction of any truCy or legiti- 
mate [italics mine] human want, and whose utility, for 
this purpose, is recognized." ^^ That is to say, utility 
was not anything whatsoever capable of gratifying any 
want, as the Utilitarians asserted, but something admin- 
istering to wants socially warranted. A test was to be 
applied that a purely descriptive science had no room 
for. And so with regard to most definitions pro- 
pounded by English economics. A national end was 
always kept in view. Economics, as O. Stein put it in 
his "Past, Present, and Future of National Economy," 
was primarily "a study of the maintenance and develop- 
ment of national productive powers." ^* Science and art 
were fused in one single study. Premises consequently 
must harmonize with standards of public welfare. Pri- 
vate property could not be an unlimited right to use, buy 
or sell wealth as the owner saw fit. Hypothetically it 
provided a basis for economic analysis, but where advis- 

»* Principles of Political Economy, vol. 1, p. 99. 
" Vol. 1, ch. 1, § 1. 

"Page 18 of Vergangenheit, Gegenwart und Zukunft der Nationalen 
Wirtschafts-Politik. 



222 THE DEVELOPMENT OF ECONOMICS 

able it had to be regulated under common law. In this 
way Knies and Schaffle, Hildebrand and Stein and Wag- 
ner proposed to ward off the revolution plotted by the 
sponsors of the Economic Interpretation of History. For 
national grandeur was decidedly preferable to the senti- 
mentalism of the socialists. 

The query may finally be put : If such was the general 
drift of Historism, how did it propose to find the laws 
expressive of progress and prosperity? And the reply 
can only be : No new method of research developed out of 
all this opposition to Utilitarianism. Hildebrand, like 
Schmoller fifty years later, essayed valiantly to expound 
a new logic for old problems, but stopped in the middle 
of his discourse. Opuscules of much merit were written 
in England, but nothing to match either the scope or 
depth of the Utilitarian logic. Leslie and Ingram dwelt 
long on the defects of the opposite school, but stuck to 
the traditional views on in- and de-duction, on modes of 
reasoning, and the limits of experimentation in the moral 
inquiries. Roscher was admirably clear in his presenta- 
tion of the historical viewpoint, so far as it contrasted 
with the static, or with the Utilitarian idea of human 
nature, but had nothing to put in place of Mill's "Logic." 
Knies was no logician, and made no pretense in his later 
years of having founded an "historical method." Hilde- 
brand kept silent on this moot point. SchmoUer's "Funda- 
mental Questions on Law and Social Economy," 1875, 
served a particular occasion and nowhere penetrates the 
surface of things. Treitschke is pilloried, but the rest is 
negligible. Schaeffle might have been expected to speak 
a weighty word on the subject, but apart from general 
remarks nothing in his ponderous tomes bears on method. 
No psychology of reasoning was attempted. No logic 
was deemed essential to the defense of Historism. If it 



HISTORISM 223 

proved to be anything other than a critique of Utilita- 
rianism, it was a philosophy of history, but one neither 
as comprehensive nor as profound as Comte's or HegePs. 

The real question for Historism was in fact not very 
lucidly stated, though it took up a great deal of space 
in its literature. And this was the question whether hu- 
man nature was to be assumed as changing with its 
physical and economic environment, or whether it was 
substantially constant? Or to bring out another side: 
Could the Utilitarian and Naturalistic economics give us 
the whole of human nature, or was there something that 
only a long-time view revealed, according to our ability 
to see and our patience in waiting for the data? That 
is, Historism was indirectly, though not in so many 
words, asking whether economics revolves about instincts 
or about experience post-natally acquired. In the 
former case psychology might supply all the requisites 
for a science such as J. S. Mill believed in when his 
"Logic" was first planned; in the latter case Comte had 
more to offer than Hume or Bentham, the natural out- 
come being a restatement of the Smithian doctrine. 

Now, Historism was emphatic in reminding us of the 
complexity of human nature and social processes, the 
number of variables being conceived as too vast for any 
marshaling into brief formulae. The universalism of 
the Utilitarians therefore was Irejected, and the field of 
economics as a science enlarged so as to embrace all social 
facts. ^^ But it needs only a perusal of the leading His- 
torical treatises to see that their methods remained the 
old. The contribution of Historism consisted in its gen- 
eral viewpoint and shifting of stress where many facts 
had to be compared and weighed; but its economics, 

^^ See for instance Ingram, J. K. Tie Present Position and Prospects 
of Political Economy ; and Dillon, W. The Dismal Science, 1882. 



224 THE DEVELOPMENT OF ECONOMICS 

strictly speaking, is either Utilitarian in details, or simply 
economic history. No such precise economic laws as the 
Ricardians had formulated were found. Deduction was 
retained in much of the descriptive work, and where the 
past was used to illuminate an abstract question of eco- 
nomic science, deduction figured as conspicuously as in- 
duction. For very good and sufficient reasons nothing 
else was possible. 

Statistics, to be sure, were also requisitioned to add 
their mite to the larger fund, but few claimed to have 
discovered fundamental principles by that route. Knies 
himself confessed that history gave only analogies which 
could not, in the long run, take the place of deduction. 
Indeed, the more one observed the complexity of human 
nature, the less permissible was a reliance upon statistics 
for the elucidation of economic laws. For correlations 
were never exactly the same ; nor was there the excuse of 
singling out specific traits on the ground, dear to the 
Utilitarians, that the plain-pleasure experiences are the 
commonest of all. Leslie was correct in saying: An 
economic law is "a function of so many independent vari- 
ables that it must be complex beyond all conception if it 
takes them all into account; while it must yet be neces- 
sarily inaccurate if it does not take them into ac- 
count.'^ ^^ In such a predicament, what was the student 
to do? Believe in economics, or abandon it for sociology, 
hoping thus to find a way to truth? Historism, to be 
consistent, had of course to decide for the latter. 

For this reason Historical economics partakes of the 
nature of a sociological survey. We are transplanted 
back, so to say, into the Kameralism of an earlier period 
where all facts are grist to the economist's mill, and 
amplitude makes up for dearth of laws, for lack of neat- 

M Social Rights and Duties, vol. 1, p. 104. 



HISTORISM 225 

ness in the weaving of constant relations. In Roscher 
and Schmoller this breadth of treatment is impressive and 
refreshing, particularly after a perusal of Senior or 
Ricardo or Cairnes. On the whole, however, Historism 
did not excel either Say or Rau or Mill, to say nothing 
of weaknesses precisely where those writers were strong- 
est. Historism, in short, brought with it an imposing 
erudition, unusual breadth of view, new light on socio- 
economic subjects, scholarly monographs by the score 
whose pages will always testify to the industry and con- 
scientious accuracy of their authors, keen criticism at 
times on sociological thought, an inspiring ideal of prog- 
ress and moral responsibilities, a better understanding 
of government and law in their bearing upon economics 
and vice versa, attempts at correlating production and 
physical environment, or income and levels of living, and 
finally a study of certain consequences due to an indi- 
vidualistic norm of productivity and capital whose sig- 
nificance had not been lost to earlier writers like Lauder- 
dale and Rae. In all these points, including an ambitious 
scheme for utilizing knowledge in a paternal type of 
public control, the advocates of the Historical principle 
did better than their predecessors. 

It was a question only whether, in achieving such 
things, economics had not lost its standing as an exact 
science; whether the original intent was not lost over a 
desire to obtain speedy results. If economics was to 
resemble natural science and mathematics, where reason- 
ing had netted knowledge of the most reliable sort, it 
would have to take counsel with itself. Many at least 
were disposed to see it that way. Once more the revision- 
ists had a clear track, if Historism fell short of its mark. 
For the second time it seemed necessary that economics 
return to older ideals, to premises which a theory of 
progress could not sanction. 



CHAPTER SEVEN 
MARGINISM 

I. Premises 

Marginism Defined. — The term Marginism has been 
applied to the doctrine which branched off from Utili- 
tarianism and Historism beginning about 1870. As the 
word is now understood, and as it for that reason will 
here be used, it means the explanation of exchange values 
by states of feeling and of consciousness in general, but 
especially also the use of least ("marginal") fractions 
as a standard for determining the value of aggregates. 
Again, marginism differed from the earlier economic sys- 
tems in that it compared units of want and feeling in- 
stead of things. Even in measuring productivity the 
standard was one of differential values psychologically 
determined, although deviations were now and then tol- 
erated for the sake of a particular argument. However, 
it is not at all impossible that this difference between ob- 
jective measurements of price through labor-time or ex- 
penses, and subjective measurements of price with the aid 
of an intellectualistic theory of feelings and demands, will 
be considered less momentous in the future than to-day. 
For on the one hand, Marginism has much in common 
with both Naturalism and Utilitarianism; and on the 
other, hedonism is only one feature in the Marginal phi- 
losophy. 

The immediate occasion for Marginism was the 

226 



MARGINISM 227 

breakdown, in various parts, of Utilitarianism. It had 
become apparent by the middle of the nineteenth century 
that the Ricardian scheme could be maintained only at 
the cost of empirical truths. The world without did not 
bear out what abstruse thinkers demonstrated so ably. 
Too many qualifications, amplifications, rectifications, 
and even contradictories had slipped into the treatises 
that started with the psychology of Bentham and Mill! 

Historism however, it was soon realized, could not fill 
the void either. For while it did good yeoman service in 
pressing the enemy back, in opposing static with dynamic 
concepts, it could not claim the field permanently. The 
kernel of truth in its argument was recognized and 
acclaimed by many who took long-time views of events, 
desirous of a moral solution of economic questions. But 
the hope — if any had entertained it at all — of discovering 
laws historically or statistically was soon given up. 
Nothing, it became evident before long, could be done if 
vast masses of material had to be turned over for pur- 
poses of induction. If Utilitarianism had made the work 
too easy, the Historians had made it unduly complicated. 
Only a prolonged sociological study could have satisfied 
men like Knies and Schmoller. Hence, while as a cor- 
rection of older deductions, of economic generalizations 
whose fallacy external conditions and policies increas- 
ingly revealed, the Historical movement had scored a 
certain success, as a program for reconstruction it had 
failed. The question remained: What was at the root of 
the Utilitarian decadence ? What must be done to protect 
economics against an art of "political economy .f"' How 
much could be retained of the old, and where lay the 
means for its development into a science comparable with 
physics or mathematics? 

Marginism was the answer to this question. The Mar- 



228 THE DEVELOPMENT OF ECONOMICS 

ginal doctrine turns on a few fundamentals, largely taken 
over from Utilitarianism, but in part peculiar to itself. 
For to begin with, the concept of an "economic man'^ and 
of hedonism in general was accepted as an indispensable, 
unassailable fact for the purposes in hand. In the 
second place, the entrepreneur standpoint, tentatively 
adopted by Smith, but consciously cultivated first by the 
Utilitarians as the only one compatible with a pretense 
to an "exact'* economics, continued to predominate, some- 
times to be sure under protest because of its apparent 
one-sidedness and menace to morality, but on the whole 
with the approval of those who held system higher than 
sentiment. 

But on the other hand Marginism replaced the objec- 
tive view of the Naturalists, Utilitarians, and Historical 
group by a subjective one, the source of value being found 
in men and not in materials. Back of things, they said, 
lay thoughts, and these latter must furnish the key to 
the problem that all other systems had practically left 
unsolved. So wants and ideas took the place of wealth 
and objects in the concrete. Totals and their changes 
were referred to least doses in successive additions or 
subtractions of wants and values. Ratios dealt with 
feelings, but not with units of goods. Or rather, these 
latter were reduced to units of the former, the differences 
between feelings or preferences, between efforts or sacri- 
fices, serving to explain ratios of supply, rates of out- 
put, and shares of income as originating within the ex- 
change regime. This reckoning of everything, of prices 
and incomes, of wealth and of capital, by differentials 
and margins psychologically measured, is the quintessence 
of Marginism. It was, in a brief phrase, a theory of 
least values and productivities, based on premises and 



MARGINISM 229 

definitions for the most part originating in Utilitarian- 
ism. 

Subjectivity of Value. — The notion of subjectivity 
however is much older than Marginism. It was mentioned, 
now vaguely, now definitely and with emphasis and pur- 
pose, by a host of writers before Jevons announced his 
discovery to the world. Condillac, e. g., in his "The 
Interrelation between Commerce and Government," 1776, 
showed that without want there can be no value, that 
imagined scarcity is as important in price-determination 
as real scarcity, that utility is not something inherent 
in things, but imputed to them by man, wherefore manu- 
facture was as truly an act of production as agriculture ; 
and he furthermore pointed to the differential preferences 
among men for one and the same thing or for different 
things as the proof of advantage in trading. No essay 
of like scope went deeper into the subject of value and 
exchange. Few of his contemporaries spoke so prophet- 
ically on an old topic that even then seemed exhausted! 

But particularly after his time was the personal aspect 
of value brought out both in Germany and in England. 
Thus Huf eland in 1807 wrote: "All goods are goods only 
because of our conception of this utility in them" ; ^ 
Thompson in 1824: "The desire removed, no labor will, 
except by compulsion, be employed upon the production 
of goods" ;^ Jennings in 1854: "Value is an attribute 
ascribed by man to objects from a remembrance of their 
services in the past, and conviction that such services are 
still available" ; ^ Courcelle-Seneuil in 1858 : "Utility of 
an object lasts as long as our opinion of it; that is, it is 

1 Quoted by Roscher, W., in his Geschichte <3er. Nationalokonomik in 
Deutschland, 1874, p. 658. 

2 Principles of the Distribution of Wealth, 1824, p. 12. 

3 The Natural Elements of Political Economy, pp. 72 and 202. 



230 THE DEVELOPMENT OF ECONOMICS 

above all subjective";^ and MacLeod in 1872: "Value, 
like color and sound, exists only in the human mind. 
There is neither color nor sound nor value in nature," ^ 
the question thus arising: "If labor is the sole cause of 
value, what is the cause of the value of labor?" 

MacLeod, to be sure, published his "Principles of Politi- 
cal Economy" a year after Jevons' "Theory" had been 
published, but certainly the question, why labor had 
value, was nowhere put so bluntly; not by Lauderdale 
nor Lloyd,^ nor Baudrillart who in "The Relation of 
Ethics to Political Economy," '^ 1860, simply made a 
distinction between utility in things and values created 
by man, following Storch in this regard. Courcelle- 
Seneuil came the nearest to a marginal interpretation of 
price in that he defined it as a balance of wants, and 
virtually did away with objective costs. In other words, 
he adapted J. S. Mill's statement to a subjective view- 
point, so that preferences took the place of differentials 
in cost. Lloyd in his lecture on the "Notion of Value," 
1833, differentiated between absolute and exchange value, 
associating the former with valuations independent of 
exchange. The importance of scarcity for economic 
value, the rise of value with decreasing supply, and the 
principle of illimitable wants due to the diversification 
of products — all these now familiar ideas gave a touch 
of novelty to Lloyd's treatment. Similarly Banfield ^ in 
1844 dealt with the effects of variety in our scaling of 
wants. However, one must go to Jennings and Gossen, 
and the better-known treatises of the seventies to ap- 
preciate the drift of Marginism in its earlier stages. 

*Trait6, vol. 1, pp. 45 and 243. See also Book I, ch. 8 passim, where 
the effect of differential wants on trade is succinctly stated. 

"Principles of Political Economy, 1872, vol. 1, ch. 5, Sect. II, §§ 9-16. 

« Lloyd, W. F. On the Notion of Value, 1833. 

' See especially pp. 244-57 of Des Rapports de la Morale et de 
I'Economie Politique. 

* Banfield, J. E. Lecture on the Organization of Labor, 1844. 



MARGINISM 231 

Jevons thus writes : Utility is an "abstract quality where- 
by an object serves our purposes and becomes entitled 
to rank as a commodity" ; ^ Menger in his "Principles of 
Economics," 1871 : "The essence of value as well as its 
measure is entirely subjective"; -^^ Wieser in 1884: 
"Value is an instance of human interest, but associated 
with a condition of things.'^ ^^ 

Between 1855 and 1875 Marginism was definitely for- 
mulated as a theory of price and income, all subsequent 
developments resting logically on the foundation laid 
during those two decades. As Table Three shows, there 
was from the start considerable agreement among the 
founders, although differences become noticeable at closer 
range. 

The Founders of Marginism. — What the five writers 
grouped together in this tabulation had in common was 
a subjective view of value, a stress of the law of diminish- 
ing returns and of the relation between scarcity and value 
— what Wieser was pleased to call the "paradox of value," 
— the relation of trade to differences in want-intensity 
as between different persons or with regard to different 
goods for any one person, the measuring of price by 
least wants respectively utilities, and the thought of con- 
necting, at one point or another, prices with income. 
Emphasis was by all five put on price. The older notion 
of things and costs was either discarded or made to fit 
in with the psychological aspects of valuation. In gen- 
eral, the economic problem was stated more concisely 
perhaps than ever before, and deductive reasoning relied 
upon for expanding the argument. 

» Theory of Political Economy, edit, of 1879, pp. 38 and 43. Jevona 
elsewhere informs us that his principal ideas were developed between 
1855 and 1860. 

^o Grundsatze der Volkswirtschaftslehre, p. 119. 

" Ursprung und Hauptgesetze des Wirtschaftlichen Werthes, pp. 79-93. 



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236 THE DEVELOPMENT OF ECONOMICS 

Appreciable differences however existed and under the 
circumstances were to be expected. For Marginism had 
small beginnings like most things impressive for their size. 
No one economist developed a Marginal system in the way 
Smith or the Physiocrats may be said to have cast their 
system at a single molding. On the contrary, growth 
was not only slow, but its stages may be easily discerned 
in the several works on the subject. The original thought 
was to explain value by going back of things and ratios 
of exchange to ideas and rates of preference or satisfac- 
tion. Not special kinds of goods were covered by this 
analysis, but only goods in the abstract, the difficulties 
inherent in a measurement of, e. g., joint utilities not 
being fully understood. The identity of price and income 
was remembered from the outset, no doubt because Utili- 
tarianism had long labored with this fact; but to follow 
it up into all the situations an imperfectly competitive 
exchange mechanism gave rise to was still another matter. 
Distribution again was not incorporated successfully into 
the pricing process until the end of the eighties, that is 
more than a generation after the first thorough treatment 
of marginal wants. 

If we compare the viewpoints of the founders Gossen, 
Jennings, Jevons, Menger, and Walras whose works ap- 
peared between 1854 and 18T4, we shall note in the first 
place marked variations in stress and method. Gossen, 
Menger, and Walras for instance said nothing of psy- 
chology, although it formed implicitly a basis for their 
reasoning. Jennings was the most explicit and careful in 
developing his psychological data, while Jevons made it 
clear from the beginning that Bentham and Bain had 
been his mentors. In the second place, the treatment was 
essentially mathematical with Walras and, in the price 
analysis itself, also with Gossen; but Jevons is readily 



MARGINISM 237 

understood without his graphs, and Jennings and Menger 
use entirely a verbal exposition, the possibility of coordi- 
nates and correlations not being even suggested. Third, 
Jennings alone restricted himself to the valuation side of 
price, while the others made less of physiology and more 
of the exchange aspect of marginal wants. Walras par- 
ticularly treated of equations of supply and demand, a 
topic which Jevons subordinated to his larger question 
of price and income, while Gossen and Menger made one 
forget their .central problem over corollaries affecting 
economic poHcies or social reforms. Fourth, as regards 
questions of policy, all five founders proved individualists 
in theor}^, but friends of public control in practice. Thus 
Gossen and Walras discussed plans for the nationaliza- 
tion of lands or of rents, in order to provide cheap 
credits or high returns to the tiller of the soil. Menger 
reported favorably on interference by the State. Jen- 
nings moralized chiefly with the intent of improving on 
the brute struggle to which he was so unwilling a witness ; 
and Jevons from start to finish took the keenest interest 
in any project on behalf of the masses. In fact, it would 
not be too much to say that Marginism was as paternalis- 
tic outside of its conceptual system as it was individualis- 
tic within it. Few economists have striven harder to 
give to the producer his share, or to raise by dint of 
concerted social effort under public supervision, the aver- 
age man's level of living and thinking than the pillars of 
Marginism, whose abstractions dealt so brusquely with 
sentimental idealists ! 

Passing over now to details one must note a good many 
differences not perhaps important for the kter develop- 
ment of Marginism, but instructive on account of the 
light they throw upon the inception of the movement. 
The following seem to deserve special mention. 



238 THE DEVELOPMENT OF ECONOMICS 

Walras was the only one to interrelate the marginal 
utilities of all goods in the market, showing that these 
relative magnitudes helped to fix the exchange-ratio for 
any one good. He also eliminated interest from a static 
view of economics, and rejected the Ricardian idea 
of a differential rent dependent upon different de- 
grees of fertility and the existence of no-rent soil. 
Second, the time-factor in the measurement of wants was 
ignored by all but Gossen and Jevons, who because of 
their mathematical training probably had a better idea 
of "functions" than the rest, while Gossen alone related 
diminishing satisfaction to periodic, habitual uses of 
a good by one and the same person. In all other 
cases the law, given different names, was illus- 
trated from consumption at one particular moment. 
Third, the "paradox of value," though implied by all 
and at any rate Lauderdale and Say, was not always 
stated clearly, nor was it till Wieser wrote his "Natural 
Value," 1889, that the phrase served regularly to ex- 
plain what labor theories of price couldn't explain. 
Fourth, the differential preferences for any one article 
by different persons was not expressly discussed by 
Jevons, while the differential satisfactions derived from 
any one material put to different uses, appearing in 
various concrete forms, seemed to him of obvious signifi- 
cance. Fifth, labor-pain was connected with pleasure- 
values by Gosscxi, Jennings, and Jevons, but not by the 
others. The first three, however, dealt with the ques- 
tion rather cavalierly, so that it would be wrong to as- 
cribe to them the ideas since associated with Marshall, 
Wieser, Dietzel, and especially also American Marginists. 
Sixth, Menger as early as 1871 gave us a productivity- 
theory of wages and an agio-theory of interest, while 
Jevons accounted for interest on the grounds of yield 



MARGINISM 239 

in concrete form. That Menger espoused the cause of 
time-preference even while reducing wage to a marginal 
contribution of labor may seem strange, but is undoubt- 
edly the case. When treating of wages the Utilitarian 
or Naturalistic definition of wealth apparently decided; 
when pondering on interest the subjective view prevailed 
■ — a circumstance nicely illustrated in the tenacity with 
which Marginism pursued the general problem of inter- 
est and capital, making of capital a fund, instead of 
treating it as a special case of tangible wealth whose 
root could be nothing else than labor. 

Seventh, Jevons was alone in emphasizing the difference 
between total and final utility, and in trying to justify 
the conception of price as the average result of many 
preferences competing at a sale. As the author of 
"Principles of Science," 1874, which even before that date 
engrossed his mind, he was not unnaturally persuaded to 
use a mathematical idea in explaining a psychological 
fact. Individual and aggregate were thus to be made 
comparable regardless of the fictitious nature of all arith- 
metical averages which none knew better than Jevons. 
Eighth, the bearing of total supply on individual ratings 
of value was overlooked by all but Walras, who however 
did not permit this discovery to mar the main argument 
of Marginism. Ninth, the problem of imputing exact 
values to individual items used jointly was boldly taken 
up by Menger and thus became paramount in economic 
analysis. Gossen however refused to deal with it be- 
cause, as he felt, the complexity of the situation would 
make any satisfactory measurements impossible. ^^ Tenth, 
the value of a classification of goods according to the 
stage they had reached in productive processes, or ac- 
cording to their joint or single use, was clearly recog- 

" Page 27. 



240 THE DEVELOPMENT OF ECONOMICS 

nized by Gossen and Menger, the latter particularly 
basing his pricing on it. The other three founders got 
along without it. They never attacked this special phase 
of the pricing problem, so did not need the distinctions 
made by the two Germans. 

The differences in details however should not blind us 
to the general agreement among the five originators of 
Marginism, nor to the rapid development of their main 
theorem. What at first had looked like a harmless 
change of front, undertaken for the sake of reconciling 
value and wealth, eventually turned out to be the signal 
for an open revolt against the "classical" doctrines. 
Jennings started by showing the discrepancy between 
Bentham's hedonism and the measuring of values through 
cost, that is through inert matter. To him the first 
point was that goods became valuable in proportion to 
scarcity, and "because their future services are antici- 
pated." ^^ The law of the variations of sensations, as 
he called the law of diminishing utility, was all important 
because it made out of value a function of feelings purely 
within us. 

Gossen by similar reasoning, though in different terms, 
arrived at the conclusion that "the price for every article 
is fixed at that point where the whole supply is sold." -^^ 
But he also urged society so to distribute its productive 
powers and consumption goods that the marginal grati- 
fication of any good would at least counterbalance the 
greatest labor-pain incurred in the production of any unit 
of such a good.^^ Furthermore, though not in the direct 
line of -economic thought, the following deductions made 
by Gossen on the strength of his principal theorem 
deserved mention : First, that the price level is determined 

" Natural Elements of Political Economy, pp. 210-12. 
^*Entwicklung der Oesetze des Menschlicben Verkehrs, p. 95. 
^^ Ibidem, p. 45. 



MARGINISM 241 

by a sum, of which one factor is the product of the velocity 
of circulation multiplied by the amount of money circu- 
lating, and the other bank-credits, this sum to be divided 
by the volume of goods exchanged; second, that rural 
credits should be subject to central control; third, that 
differential land-rents might be used by the government 
to buy land with a view to renting it out at reasonable 
rates to the most efficient workers ; fourth, that child 
labor should be prohibited and women given the same 
rights and educational facilities as men; and fifth, that 
science be used more liberally toward the application of 
religion to social questions. 

Gossen, then, was a man of many ideas, and a worthy 
contemporary of Jennings. That both failed to make an 
impression upon their own age is due not to their inability 
to explain their novel viewpoint, but — we must assume — 
to the prestige and official standing ot opposite lines of 
thought. Utilitarianism was at its height in the second 
third of the nineteenth century. The reservations that 
gradually came to mar its logical structure or its main 
arguments had not yet become obtrusive. Psychology 
itself had made appreciable progress even before 1870, 
but it was not studied by economists so as to either injure 
Utilitarianism or benefit a subjective approach to price 
analysis. 

Menger and Jevons gained a hearing at once partly 
because of the controversy raised by Historism, and 
partly because of the skill with which Jevons made use 
of sensationalistic psychology in developing his marginal 
concept. Certainly it was significant and in a way for- 
tunate that three men like Jevons, Menger, ami Walras 
arrived almost simultaneously at the same fundamental 
opinion. For now there was a link provided between 
Austria, France, and England that could not but hasten 



242 THE DEVELOPMENT OF ECONOMICS 

the dissemination of the new knowledge. Herbartian 
psychology and Fechnerian experiments were nowhere 
enlisted to strengthen the main argument. What counted 
was solely the common bond of a single subject for all 
three investigators, a desire to clear economics of cer- 
tain inconsistencies that the early Ricardians had noth- 
ing to do with, and the hope, lambent in all three writers, 
that economics might fulfill its first promises, might be 
proven to constitute a true science, might yield precise 
results regardless of what nationalists and historians 
claimed to the contrary. Utilitarianism from a new 
angle, with slightly different stress of materials and 
methods, this was the aim of Marginism from the outset! 
As a result of these first inquiries of the pioneers some 
decidedly fundamental propositions were laid down even 
before 1880, a fact easily overlooked when one labors in 
the midst of treatises written since that time. Walras, 
e. g., had said in his "Elements of Pure Economics," 
1874: Effective demand is "demand of a certain amount 
of goods at a certain price," ^^ and : "The demand or 
supply of each of the commodities (exchanged) by each 
of the traders is a function not only of the price of that 
commodity, but also of the price of all others. . . ." ^^ 
Both Menger and Jevons used the idea of interchangeable 
units in a homogeneous supply of commodities or serv- 
ices, ^^ a thought that lent a convincing tone to the general 
theory of imputation and could not well be dispensed 
with, whether stated in so many words or not. However, 
neither Gossen nor Walras mentioned the question at 
all, doubtless because of their special interest in the 

"Elements d'Economie Politique Pure, 2. edit., p. 68. 

" See an article of his in Annals of the American Academy of Political 
and Social Science, vol. Ill (1892), entitled Geometrical Theory of the 
Determination of Prices, p. 47. 

" Jevons, W. S. Theory of Political Economy, 2. edit., p. 94. See 
also Menger, C. Grundsatze, ch. 3, § 2-3. 



MARGINISM 243 

market side of pricing. In general, it must be admitted, 
Menger and Jevons went farthest in their attempts at an 
all-embracing price analysis, Menger for instance acting 
with this end in view when he carefully noted the difference 
between goods admitting of one use only, and such as 
might be used successively and to many different pur- 
poses. Suggestions for a measurement of putative 
amounts of a product due to any one agent were thus 
given from the start. 

However, Jevons was no less a logician than the Aus- 
trian. Indeed, if anything he reasoned more formally 
and laid more facts under tribute to prove his point. In 
his "Principles of Science" of 1874 he traced out a 
system of logic at once comprehensive and bold. De- 
viating from J. S. Mill he regarded deduction (through 
substitution) as the arch-type of all forms of inference 
and showed the element of mere probability characterizing 
our knowledge. Probability to him was the core of sci- 
entific reckoning, and the average a most important con- 
cept. It was hence no accident that he pictured price as a 
resultant average of many individual and variable prefer- 
ences competing in the open market. He never recanted 
his original theorem that economics deals with measur- 
able quantities; but for this reason also the difficulties 
facing a conscientious economist were held to be great. 

To state his position in a few words : "The final degree 
of utility is that function upon which the theory of eco- 
nomics will be found to turn." -^^ "The last increments in 
an act of exchange must be exchanged in the same ratio 
as the whole quantities exchanged." ^^ The price law is 
a "law operating in the case of multitudes of individuals 
which gives rise to the aggregate represented in the 

^» Theory of Political Economy, p. 56. 
20 Page 102. 



2U THE DEVELOPMENT OF ECONOMICS 

transactions of a nation." ^^ But still further, he sought 
to bridge the gap between the objective and subjective 
analysis of value, informing us that "articles will ex- 
change in quantities inversely as the costs of production 
of the most costly portions, i. e., the last portions 
added." ^^ And finally it was he also who set an example 
for a productivity view of interest in the words : "The 
interest of capital is the rate of increase of the produce 
divided by the whole produce." ^^ 

So far the founders of Marginism. What developed 
after 1875 may be stated in comparatively brief space so 
long as we have in mind only the essentials that became 
an integral part of the system. Contributions since then 
have come as much by way of criticism, especially during 
the last decade, as in direct and intentional furtherance 
of it. Marginism found few friends in France and Italy, 
unless one were to reckon all mathematical expositions as 
a proof of Marginism, a point difficult to defend. In 
Germany and England its reception was more cordial, 
yet even there not unmixed with misgivings. So it is in 
Austria and in the United States that Marginism may be 
said to have become lodged most firmly, in the former 
country from 1870 on, in the latter only toward the end 
of the century. 

Economics in America. — American economics, like 
that of other countries, bore the marks of the environ- 
ment in which it grew up. Prior to the Civil War moral 
philosophy was still the customary unit of study anent 
everything not natural science or mathematics. Chairs 
of economics hardly existed before 1870. Important con- 
tributions had been made by thinkers such as Raymond, 
Rae — whose influence however was slight for the moment, 

'1 Introduction, p. 17. 
22 Page 203. 
" Page 267. 



MARGINISM 245 

— Carey, E. P. Smith, and Bowen, but without serving 
as a nucleus for a compact system except in the case of 
H. C. Carey. Carey was the outstanding figure in early 
American economic or sociological thought. His inter- 
ests covered the whole realm of philosophical inquiry 
and enabled him to offer effective resistance to Malthu- 
sianism and Ricardianism when at the very pinnacle of 
their fame. John Rae, a Scotch emigrant, was the 
author of the "Statement of Some New Principles on the 
Subject of Political Economy, Exposing the Fallacies 
of the System of Free Trade, and of Some Other Doc- 
trines Maintained in the 'Wealth of Nations' [of Adam 
Smith]," 1834. Few books of that time went more 
thoroughly into the relation of value to wealth, or of 
both to capital, or of all three to human progress. But 
nothing came of his labors for the time being. Henry 
George scored a victory with his "Progress and Poverty," 
1879, yet it would be difficult to assign him a definite 
place either in American or in European economics as 
a science. His outlook was historical, but his superi- 
ority lay in the application of a single idea, taken out of 
earlier systems, to a popular question. As for the rest 
of the group that might be mentioned by name, they either 
built on English models, or else echoed the sentiments of 
Carey. The dominant interest was practical, a reflection 
of commercial policies, problems on taxation, public do- 
main, currency and banking, as they existed during this 
period. 

After the Civil War however the appreciation of 
abstract questions grew. The economic development of 
a nation blessed with unparalleled resources and teeming 
millions continually augmented from abroad gave rise to 
needs, to opportunities in leisure, that could hardly fail 
of expression in economic literature. Railroads and 



246 THE DEVELOPMENT OF ECONOMICS 

steamships began to bind east and far west as stage coach 
or clippers skirting the coasts could not have done. 
Industry was put on a broad basis by the discovery 
of new natural riches, as well as by mechanical and scien- 
tific inventions largely due to native ingenuity. The 
"frontier" gradually was pushed out to the Pacific, so 
that a land problem might very well arise. Capital went 
into non-agricultural improvements mainly. A lion share 
went to public utilities, to mines, to factories, and to the 
development of city life. Congestion became more con- 
spicuous along the eastern side of the Appalachians than 
sparseness of population in the Mississippi valley. Large 
scale production supplanted the former meager attempts 
at a supply of neighborhood demands. A proletariat 
emerged out of this industrialization of capital and 
energy, not so very different from what Europe had to 
grapple with, but possibly more self-conscious because 
of its youth and comparative well-being. Foreign pol- 
icies still were a minor issue, but there was plenty to think 
about that might, directly or indirectly, turn on economic 
theory. 

What is more, young men went to Europe to get a 
higher education or to finish their studies in special lines. 
Germany became a haven for many who sought light on 
sociological questions. And when these returned the ma- 
terial was at hand for university research at its best, in 
quantities that since then have revolutionized popular 
ideas on most things economic. Between 1885 and 1890 
economics became a profession to which increasing num- 
bers devoted their talent and time. In 1883 the Johns 
Hopkins University Studies in History and Political 
Science began to appear. In 1884 the American His- 
torical Association had been founded. In 1886 followed 
the American Economic Association whose publications 



MARGINISM 24*7 

have filled long shelves in the libraries. In the same year 
also the Political Science Quarterly was launched, and 
the next year the Quarterly Journal of Economics. In 
1890 was founded the American Academy of Political 
and Social Science; in 1892 the Journal of Political 
Economy, and in 1895 the American Journal of Soci- 
ology. Thus within a very few years societies had sprung 
up whose labors found space in scientific journals, in 
book form, and in the daily press. 

The prevailing tone of this American movement, if one 
may judge from its printed output, was at first historical 
and in a measure even paternalistic. The influence of 
German ideas was not shaken oif in a trice. It was not 
likely that it would be. However, Anglo-Saxon ancestry 
counted ere long. The triumph of Marginism between 
1890 and 1905 is excellent evidence for the impossibility 
of grafting Historism on to foreign stock. Though 
strong in Germany it was not after all capable of satis- 
fying the demands of a newer and larger country where 
the past was short and the future so big with possibilities. 
Marginism made headway most rapidly where the His- 
torical movement could not thrive: In Austria and in the 
United States, but not on German ground where meta- 
physics had so eloquently presented the present as merely 
a by-product of the past. As events have taught us, it 
was easy to pass from Utilitarianism to Marginism, but 
to convert the Historical group was a task attended with 
almost insuperable difficulties. 

Marginism thus made progress in America, even 
though the believers in Historism or in a revised Utili- 
tarian doctrine carried on their own work with undi- 
minished vigor. All three phases were duly s\:iidied and 
incorporated in systematic treatments of economics ; but 
Marginism was given most serious consideration. 



248 THE DEVELOPMENT OF ECONOMICS 

In Austria the Marginal system received its finishing 
touches at the hands of Wieser and Bohm-Bawerk. By 
1889 little remained to be done. In Germany all that was 
essential had been said by 1895, and in America by the 
end of that decade. The development in general followed 
the lines sketched out by the pioneers before 1875. The 
pricing problem was first solved so as to comprise all 
classes of goods, some services included. From a bare 
contrasting of costs and utilities the analysis went on to 
fix the price for each exchange of goods under conditions 
roughly true to facts. The distributive aspects were 
next discussed from various angles, the break with Utili- 
tarian laws being gradual, though inevitable because of 
the subjective definitions which conformed strictly to a 
competitive regime. Exact measurements were aimed at 
and confidently undertaken as descriptive of principles 
universally valid. Exceptions were noted, but did not 
make serious inroads, — so it was held, — upon the main 
argument. Marginism as a static enterpreneur statement 
of value and distribution constituted the core of the sci- 
ence of economics. Applications were found for questions 
of public finance, of wage regulation, and a theory of con- 
sumption. All in all, progress was rapid and gratifying 
to those who thought of economics chiefly as a concep- 
tual science, somewhat on the order of mathematics, the 
need of verification and an adequate methodology not 
appearing urgent. The abundance of treatises on Value 
and Distribution, or on Principles of Economics which 
pivoted mainly about a Marginal price analysis, is suf- 
ficient evidence of the esteem enjoyed by the new doc- 
trine, in America fully as much as in the Old W'^rld. 

Psychology of Marginism. — The strength of Marginism 
was for one thing its psychological basis which men like 
Jennings and Jevons took special pains to make clear, 



MARGINISM 249 

but on the other hand also the superiority of Mill's logic 
over that of Historism. What Menger, the chief ex- 
pounder of Marginal method, said in his widely read essay, 
was no great advance over the Utilitarian. Nothing was 
said on this subject by Marginists that could compare 
with the penetrating treatment of J. S. Mill. However, 
just because the one was for the most part a review of 
the earlier work (with slight changes here and there), 
Marginism won its case. There was no need of discard- 
ing the traditional methodology. Only Historism had to 
do that, and was so much the worse off for it. The 
Austrian school could adapt the approved deductive 
logic easily to its own ends, for like Utilitarianism it 
preached statics and competitive rights. The individual 
remained the unit of action and of values. 

Again, it was not the German nation that gave Mar- 
ginism a solid foundation in psychology. In this respect 
too the credit belongs entirely to England, the land of 
empiricism par excellence, and of innumerable volumes 
on Human Nature, on the relation of ethics to the emo- 
tions, of economic law to primal instincts. It was indeed 
symptomatic that Walras observed silence on this topic, 
that the Austrians barely alluded to it, and that in Eng- 
land it received careful consideration from the start. It 
would seem the very abundance of material there aroused 
a sense of responsibility, for had not the Utilitarians 
reverted again and again to those fundamental traits 
that governed all social phenomena? 

The psychology of Marginism is British and not of 
the continent. In spite of the fact that Herbart had 
given new life to the "faculty"-psychology of the ideal- 
istic philosophy, in spite of the discoveries of Weber 
and Fechner, in spite of the predominance which Germany 
was to acquire in this field after 1870, economists turned 



250 THE DEVELOPMENT OF ECONOMICS 

in England knowingly, elsewhere perhaps unwittingly, to 
the thoughts of Hume, Hartley, and the two Mills. 
Gossen and Menger made nothing of the psychological 
presuppositions with which they were working; nor did 
Walras in 1874. Jennings, on the contrary, hardly gets 
away from them, and Jevons accorded them a conspicu- 
ous place both in the first and in the second edition of 
his "Theory." 

Hobbes deserves quoting once more, if only to show the 
antiquity of a fundamental thought in Marginism, or 
possibly one should say, in order to illustrate again how 
near great thinkers have come to novel ideas without 
fully realizing it. In the "Leviathan" he had written: 
"The value of all things contracted for is measured by 
the appetite of the contractors, and therefore the just 
value is that which they be contented to give." ^* That 
was in 1651. In 1785 Paley, the author of "The Princi- 
ples of Moral and Political Philosophy," remarked that 
"pleasures by repetition lose their relish. It is a prop- 
erty of the [human] machine, for which we know no 
remedy, that the organs by which we perceive pleasure 
are blunted and benumbed by being frequently exercised 
in the same way." . . . "The truth seems to be that there 
is a limit at which these pleasures soon arrive, and from 
which they ever afterwards decline. They are by neces- 
sity of short duration, as the organs cannot hold on their 
emotions beyond a certain length of time; and if you 
endeavor to compensate for this imperfection in their 
nature by the frequency with which you repeat them, you 
suffer more than you gain, by the fatigue of the faculties 
and the diminution of sensibility." ^^ 

Jennings in his most stimulating "Natural Elements 

" Edition of 1651, p. 75. 
2» Book I, ch. 6. 



MARGINISM 251 

of Political Economy," 1855, acknowledged at once his 
indebtedness to men like Locke, Hartley, D. Stewart, Th. 
Brown, R. Whately, Carpenter, J. F. W. Herschel, and 
Jas. Mill. He deplored the indifference of economists to 
this crucial problem in their field, namely the problem of 
what psychology had really to say about wants and valu- 
ations. To him the social origin of values is self-evident 
and of paramount significance. "Human communities," 
he wrote, "are living organisms," ^^ and nothing could be 
true of the individual but it must apply in large measure 
to social interrelations, the economic not excluded. Hence 
the need for an inquiry into the roots of human designs 
of which the Ricardians seemed so blissfully ignorant. 
Or rather, what the orthodox group took for granted 
should be explored lest false conclusions were drawn that 
might satisfy the requirements of a syllogism, but not 
the best reason of statesmen responsible for human 
welfare. 

Jennings therefore restates the old Locke-Hartley- 
Hume-Mill theory of consciousness, deriving ideas from 
sensation and impressions from ideas in Hume's style, 
making of ideas copies of perception due to a sensation ex- 
ternally aroused. Of simple ideas compound ones are con- 
structed. Association binds ideas into chains so that 
the re-arousal of any one link will entail the recollection 
of the other members in the series. Brown's contention 
that not only ideas, but feelings too are subject to this 
principle is greeted with applause as helping materially 
in the investigation. Feelings are ideas felt again, as 
they were once felt through primary sensation. The bulk 
of feelings consist of the category pleasure and pain. 
Feelings, like Hume's perceptions, vary in liveliness or 
intensity and duration, our idea of a former sensation 

26 Natural Elements, p. 61. 



252 THE DEVELOPMENT OF ECONOMICS 

reflecting commonly such differences. Remembrances of 
pleasure engender conative forces, motives whose popular 
name is wish, wishes being the more intense the oftener 
their prototype has recurred, and the stronger the sensa- 
tion. Man desires pleasure naturally ; because of asso- 
ciations want and action arise even when the original 
object of desire is absent. 

This Hartley-Humian view of consciousness, learning, 
and the emotions had been taken over by James Mill and 
rounded out into a comprehensive "Analysis of the 
Phenomena of the Human Mind," of which something has 
already been said a propos of Utilitarianism. Mill wrote 
among others the following significant passages : "All 
sensations are capable of being revived." ^^ "An idea is 
the revival of a former state of feelings." ^^ Ideas are 
feelings "which exist after the object of sense has ceased 
to be present." ^^ Ideas of the causes on pleasurable and 
painful sensations are "never ideas of the causes sepa- 
rately, but ideas both of the causes and of their effects, 
inseparably joined by association. They are therefore 
always either pleasurable or painful, being complex ideas, 
to a great degree composed of the ideas of pleasurable 
and painful sensations." ^^ "The anticipation of a future 
sensation is merely the association, the result of prior 
sensations, of a certain number of antecedents and conse- 
quents." ^^ "A motive is an idea of a pleasure." ^^ 

Jennings not only understood these chapters of James 

Mill, but accepted them as true and applicable to his 

own economic intents. He followed pretty nearly the 

whole length of the argument, and then drew further 

"Analysis of the Phenomena of the Human Mind, edit, of 1869, ch. 
19. 

28 Ibidem. 

29 Vol. 1, ch. 2. 
*'Ch. 24. 

31 Ch. 22. 

32 Fragment on Mackintosh. 



MARGINISM 253 

conclusions ; such as that our penchant to save is the 
result of associating pleasure with production goods, 
although at the start man thought of nothing but the 
consumption good.^^ He inferred that pleasure leads to 
valuation, and this to desire, and this in turn to action or 
exchange. He wrote: "By memory, confidence in the 
future, comparison and abstraction, acting under the ever 
present influence of Combination [i. e., association] — the 
feeling of satisfaction eventually grows into the concep- 
tion of value. . . ." ^^ Prices had to vary with satisfac- 
tions. There was no alternative to this law. In short, 
Jennings' view was not that of the evolutionist who at- 
taches race-preserving values to selfishness, but that of 
a thinking eighteenth century man who was groping for 
light on the problem of good and evil, respectively of 
valuations economic. 

Jevons, in the important third chapter of his "Theory 
of Political Economy," expressed his sense of obligation 
to Jennings who had "most clearly appreciated the 
nature and importance of the law of utility," i. e., of 
diminishing satisfaction. It was a characteristic of 
Jevons to give credit to whom it was due, openly and 
generously. However, while Jennings undoubtedly influ- 
enced Jevons, particularly by his lucid presentation of 
the Hartley-Hume theory of consciousness which no other 
economist had previously applied with so much force to 
the question of value, the chief support of Jevons was 
Bentham. Hume and Paley, Banfield, the precursors of 
the mathematical group of economists, these and many 
French writers were cited in the "Theory." But the chief 
burden lay on Bentham and James Mill, t^ie latter's 
"Analysis of the Phenomena of the Human Mind" having 

" Natural Elements of Political Economy, pp. 189-92, 
" Pages 181-82, 



254 THE DEVELOPMENT OF ECONOMICS 

been given the benefit of A. Bain's comment. Through 
Jevons, in this manner, the UtiHtarian psychology crept 
into the Marginal interpretation. With hardly an excep- 
tion the Marginists admitted the hedonistic basis of their 
system. Without presenting it in detail, as Jennings and 
Jevons made bold to do, its real significance for the main 
argument was nevertheless recognized. The position of 
Jevons therefore has turned out to be a crucial one from 
the standpoint of methodology, although its larger as- 
pects of course received more competent consideration at 
the hands of Menger. 

Three main questions must he distinguished in the 
psychological problem as Marginism might have under- 
stood ity and often did understand it. The first was : How 
could sensations become wishes .? The second: What was 
the means for measuring either or both? The third: 
Should the facts established be used for a theory of 
ethics? One cannot do better than to keep these three 
questions separate, for to the economist only the first two 
were of paramount significance. As it happened, to be 
sure, Jevons himself was a Utilitarian in the narrower 
sense who had "no hesitation in accepting the Utilitarian 
theory of morals which does uphold the effect upon the 
happiness of mankind as the criterion of what is right 
and wrong," provided one put "the widest and highest 
interpretation upon the terms used." ^^ However, the 
majority of Marginists were not interested in this side 
of the matter. They disagreed with the Benthamites or 
even with J. S. Mill's essay on "Utilitarianism," yet re- 
mained ardent disciples of the viewpoint first developed 
by the five founders. But the vital fact is this, that 
one was not at all obliged logically to assent to ethical 

'5 Theory of Political Economy, 2. edit., 1879, Introduction. 



MARGINISM 255 

applications of hedonism, when making it the basis of an 
economic valuation. 

Now Jevons did not consider the first question, viz., 
how could sensations become wishes, as fully as Jennings. 
He did not repeat the familiar argument of Hartley and 
Hume or James Mill, except in fractions here and there 
a propos of what was uppermost in his mind, namely the 
measurement of feelings. Jevons took it for granted that 
sensations are the root of all ideas, that ideas are either 
simple or compound, that feelings are necessarily of three 
kinds as Bentham had pointed out, and that emotions 
are aroused by ideas which themselves, just like feelings, 
obey certain fundamental laws of association. Feelings 
had to be either pleasant or disagreeable or indifferent, 
the former two being in an overwhelming majority. 
Through association it was possible, nay inevitable, that 
one could think of things not directly presented to the 
senses ; and furthermore, the remembrance of a pleasant 
sensation could be linked up with an object not itself re- 
sponsible for it. Means to pleasure, as eighteenth cen- 
tury empiricists had shown, could become ends by a 
process of transference of ideas. 

What of wishes then.^ It was a commonplace among 
English psychologists that the re-arousal of an idea, say 
by association, brought with it an echo of the original 
sensation or emotion coupled with it. First perceptions 
could be restored in this way. Feelings were revived, and 
just as at the original experience an aversion or wish 
resulted, accompanied by suitable action, so upon revival 
of the emotion the impulse came back. Desire was the 
child of ideas, of remembrances of pleasurable s ensations. 
Hence, to make a long story short, primary impressions 
received by the infant were transformed into habitual 
wishes directed either toward a possession of the original 



256 THE DEVELOPMENT OF ECONOMICS 

stimulus, or toward such others as by association seemed 
equally worth while. Consciousness turned on the acquisi- 
tion of pleasure-exciting things because these and the 
disagreeable experiences formed the great bulk of human 
experience. 

For this reason Jevons could say that his economics 
was "entirely based on a calculation of pleasure and 
pain," that it was a "mechanics of utility and self- 
interest." ^® For this reason also his comparison of 
anticipation and realization was intelligible, for it was a 
special case of the general relation between sensations 
and centrally aroused emotions. Since ideas came from 
perceptions, and since association regulated most of our 
feelings and judgments, the expectation of a pleasure was 
a function, as Jevons remarked, of past pleasure and 
future actual pleasure. "The intensity of present an- 
ticipated feeling must ... be some function of the fu- 
ture actual feeling and of the intervening time, and it 
must increase as we approach the moment of realiza- 
tion." ^^ Upon this power of anticipation, we are re- 
minded, "is based all accumulation of stocks of commodity 
to be consumed at a future time." ^^ Curiously enough, 
Jevons did not use this concept for an agio-theory of 
interest. He was more interested in the balance between 
physical increments due to capital and the pain of ab- 
stinence than in time-preference by itself ; but a sugges- 
tion certainly had been made that others could turn 
to good account. 

Having then concluded by way of a quotation from 
Bain that "our volimtari/ activity [italics mine] is moved 
by only two great classes of stimulants, and that either 
pleasure or pain, present or remote, must lurk in every 

'^ Ibidem. 
" Ch. 3. 
»8 Ch. 2. 



MARGINISM 257 

situation that drives us into action," Jevons adopted in 
body the Benthamite doctrine of feelings as quantities, 
and nothing but quantities. The second chapter of the 
"Theory" was designed to prepare the reader for argu- 
ments grounded on this assumption. Bentham's "Intro- 
duction to the Principles of Morals and Legislation" 
served as a starting point for the exact measurement of 
feelings, and from Bain's "The Emotions and the Will," 
1859, he quoted: "When pain is followed by pleasure 
there is a tendency in the one, more or less, to neutralize 
the other." ^^ To be sure, Jevons doubted whether "men 
will ever have the means of measuring directly the feelings 
of the human heart. A unit of pleasure or of pain is 
difficult even to conceive," ^^ and so on. But the way out 
manifestly was to predicate a constant quantitative rela- 
tion between feelings and the actions resulting from 
them. "It is from the quantitative effects of the feelings 
that we must estimate their comparative amounts." *^ 
"The will is our pendulum, and its oscillations are 
minutely registered in the price lists of the markets." *^ 
"Pleasures, in short, are for the time being as the mind 
estimates them, so that we cannot make a choice or 
manifest the will in any way without indicating thereby 
an excess of pleasure in some direction." ^^ Again : "Just 
as we measure gravity by its effects in the motion of a 
pendulum, so we may estimate the equality or inequality 
of feelings by the decisions of the mind." ** 

All of which meant that the proof of pleasure in an 
action was our willingness to act ; or to put it differently, 
that the degree of intensity of wanting something was 

" Ibidem. 

^ Introduction. 

" Ibidem. 

« Ibidem. 

*^ Ibidem. 

** Ibidem. • 



258 THE DEVELOPMENT OF ECONOMICS 

measurable by what we forewent in other pleasure, or 
suffered in physical or mental pain. Thus: "Anything 
which an individual is found to desire and to labor for 



a, 



must be assumed to possess for him utility." ^^ It is 
convenient name for the aggregate of the favorable bal- 
ance of feeling produced — the sum of the pleasure cre- 
ated and the pain prevented." ^^ "The intensity of feel- 
ing," correspondingly, "must mean the instantaneous 
state produced by an elementary or infinitesimal quan- 
tity of a commodity consumed." ^'^ The act itself of pur- 
chase or of use testified to the reality of a new addition 
of pleasure, and a commodity, "if consumed by a per- 
fectly wise being, must be consumed with a maximum 
production of utility." ^^ In this spirit Jevons ap- 
proached the task of equalizing feelings and appraisals 
of wealth. Feelings were to be gauged indirectly. 
Prices alone could inform us as to want intensities, but 
since these were bound to represent increments of pleas- 
ure and degrees of utility, utilities at the margin could 
be said to *^ determine^' prices. The old utility notion of 
Senior and others which Jevons had particularly in 
mind, was thus made available for measurements that 
Utilitarianism had not dreamed of. 

Other Marginists accepted the hedonistic postulate and 
until recent times did not question its worth. If Gossen 
had said, in the opening sentence of his book, that "man 
wants to enjoy life and makes it his chief aim to maxi- 
mize happiness," ^^ Wieser in his "On the Source and 
the Principal Laws of Economic Value," 1884, also as- 
serted that "the wants of an artist differ only in degree 

«Ch. 3. 
*^ Ibidem. 
*'"' Ibidem. 
« Ibidem. 

*» See Entwicklung der Gesetze des Menschlichen Verkehrs, pp. 4-5, 
12, 23. 



MARGINISM 259 

from those of a hungry beggar." ^^ Marglnism, he con- 
fessed, was an application of psychological tenets, though 
the precise nature of this application was dismissed 
with a bare mention of the Weber-Fechner experiments. 
Pareto, in his "Manual of Political Economy," 1879, ex- 
pressly singled out exchange-valuations from the moral 
and theological ^^ as being the only measurable ones — 
i. e., measurable in the sense Jevons had himself explained. 
A little later Pantaleoni declared: "Economic science 
consists of the laws of wealth systematically deduced 
from the hypothesis that men are actuated exclusively 
by the desire to realize the fullest possible satisfaction 
of their wants with the least possible individual sacri- 
fice." ^^ And perhaps it would not be out of the way to 
close with a passage from a noted critic of the static 
Marginal system who nonetheless believed that "a theory 
of prosperity assumes not only that pleasures and pains 
are commensurable, but also that a comparison can be 
made between the pleasures and pains of individuals liv- 
ing during different periods." ^^ Thus had the Utili- 
tarian psychology taken possession of Marginists of va- 
rious shades who endeavored to preserve for economics 
its scientific character! 

Wants, feelings, utilities, pleasures, happiness, and 
purchase were all one. An equation was invented for 
ideas and desires, for price and pleasure, for emotion and 
estimates, and in some quarters even for pleasures and 
virtue. Ideas through desires dominated preferences for 
goods. Rates of exchange furnished prima facie evi- 
dence of the relative intensities of wants. A rational 
egoistic ^'economic man" took precedence oveg: all other 

so Ursprung und Hauptgesetze des Wirtschaftlichen Werthes, p. 147. 
" Manuel d'Economie Politique, 1909, p. 145 ; ch. 2, § 108. 
»2 Pure Economics, transl. by Bruce, T. B., 1898, p. 7. 
Bs Article on Cost and Utility by Patten, S. N., in Annals of American 
Academy of Political and Social Science, vol. Ill (1892-93), p. 410. 



260 THE DEVELOPMENT OF ECONOMICS 

human factors in society. Because of certain laws of 
mind which escaped our control economics was in a po- 
sition to formulate definite propositions regarding price, 
income, and productivity. Economists, in describing 
these laws, did their whole duty even though some of the 
most vital questions, from another standpoint, were not 
answered. 

Marginism and Ethics. — For instance, the ethical as- 
pect of social life or of individual conduct was not con- 
sidered by the majority of Marginists a part of their 
science. The maxim of Bentham that pleasure and hap- 
piness are the same thing, and that virtue has no exist- 
ence except in the attainment of happiness did not find 
many friends among the successors of Utilitarianism. 
The philosophy of Bentham and Mill was British, and 
not of the continent. In France, to be sure, it had 
gained some vogue and expressed itself rather effectively 
in Comte's Positivism. However, it should not be over- 
looked that even Comte's teachings terminated in mys- 
ticism. In Germanic lands it had never found much 
favor. Scientific socialism came nearest to it, but the 
idea of a cosmic law of changes, according to which eco- 
nomic stages determine non-economic life, deprived it 
of its original meaning; for the course of history was 
beyond human will; responsibility lay with the individ- 
ual only in the sense that variations in thought and deed 
seemed to the individual self-regulated. In reality sci- 
ence taught differently. 

Marginism thus grew up in an environment that took 
its morals from the transcendentalists and theologians. 
The universities at which the Austrians or Walras re- 
ceived their training were idealistically toned and under 
the sway of ideas alien to Benthamism. If even in 
England, as was shown earlier, many Utilitarian econo- 



MARGINISM 261 

mists preached an ethical absolutism, this was still 
more the case among the Europeans and the Americans. 
Metaphysics, Puritanism, the Bible, Christian dogma, and 
the natural penchant of men for a lofty conception of 
right and wrong prevented a merging of ethics in eco- 
nomics, to the chagrin apparently of many writers. 

But to begin with, the question arose: What is meant 
by economics when we explain its position relative to 
ethics? Do we refer to the science in the abstract, or 
to applications of an economic nature, or to special eco- 
nomic inquiries, or to a description of economic facts as 
such? Jevons had remarked that there were bound to 
be several economic disciplines, such as, e. g., "commer- 
cial statistics, mathematical theory of economics, sys- 
tematic and descriptive economics, economic sociology, 
and fiscal science." ^^ Keynes granted the possibility of 
an art of political economy, though certain that it would 
"be largely non-economic in character." ^^ Menger, 
working along the lines marked out by German writers, 
from Kameralism upward to the encyclopedic compendia 
of his own day, recognized the four sciences of historic 
development and statistics, of morphology, theory of laws, 
and politics.^^ These four, he believed, made up the 
whole field of economics, adding that "the methods of 
theoretical political economy and of practical sciences 
of economics cannot be the same." ^^ The bearing of this 
on ethics was obvious. 

Philippovich in his "Outlines of Political Economy," 
1887, one of the most readable and popular works of 
Marginal persuasion, held to traditions when he divided 
his science into four main parts, viz. description, His- 

"* Preface to second edition of his Theory of Political Economy. 
" Scope and Metnod of Political Economy, p. 80. 
'* Conrad's Jahrouecher, Neue Folge, 1889, vol. 19. 
" Untersuchungen. 1883, p. vi. 



262 THE DEVELOPMENT OF ECONOMICS 

tory, Theory, and Policy.^^ The Theory represented 
plain economics or National Economy; the Policy most 
of applied economics, while Public Finance was grouped 
separately. In this way, including possibly a World or 
Social Economics descriptive of universal principles, his 
classification was meant to do justice to all phases of 
the subject. 

Now, dependent upon which of these divisions was 
kept in mind, ethics might be said to be part of eco- 
nomics, or not. Jevons, to be sure, was not bothered much 
by such niceties of distinction. He simply gave a variant 
on Bentham in suggesting that while economics cannot 
dictate moral norms to society, it could nevertheless 
recognize qualities of pleasures and judgments, confining 
itself to what perhaps should be called the lowest in 
rank. Paley could not be right in denying qualitative 
differences between feelings. "A single higher pleasure 
will sometimes neutralize a vast extent and continuance 
of lower pains." ^^ But economics treats of "the lowest 
rank of feelings. , . .^^ Each laborer, in the absence of 
other motives, is supposed to devote his energy to the 
accumulation of wealth. A higher calculus of moral 
right and wrong would be needed to show how he may 
best employ that wealth for the good of others as well 
as himself." ^-^ 

Menger, in his illuminating though not very thorough 
treatment of the whole methodological question, shut out 
ethics from economics without hesitancy. ^^ Moral facts, 
he admitted, are actually imprisoned in economic goods, 
but since they defy measurement they had best be ig- 

58 Grundriss der Politischen okonomie, 9. edit., vol. 1, p. 42. See 
also Sax, B. Wesen und Aufgaben der Nationalokonomik, ch. 6 ; and 
Wagner, A. Lehr- und Handbuch, 1. edit., vol. 1. 

^» Theory of Political Economy, Introduction. 

*" Ibidem. 

81 Ibidem ; also p. 23. 

«=* Untersuchungen, App. 9; and p. 69. 



MARGINISM 263 

nored. Practical economics, furthermore, might very 
well make use of economic abstractions, but that had 
nothing to do with problems of good or evil.^^ He agreed 
in this respect with Walras who in his "Elements," edition 
of 1889, repeated an earlier view that science studies 
truth, art what is useful, and ethics what is equitable; 
and this being so, ethics was clearly eliminated from eco- 
nomic inquiries. ^^ Similarly GIde, though of course not 
a Marglnist, wrote in his "Political Economy": "To 
do one's duty, to exercise one's rights, to provide for 
one's wants, are three fairly distinct ends of human ac- 
tivity." ^^ And again Cossa : "Ethics is absolutely for- 
eign to pure economics," ^^ though it might play a role 
in applications. 

Sax, the author of "The Nature and Ends of National 
Economy," 1884, declared economics to be simply de- 
scriptive, while applied economics was necessarily norm- 
ative,^^ a view voiced also by Schumpeter in his "Na- 
ture and Principles of Theoretical Economics," 1908.^^ 
Pierson, the Dutch Marglnist, wrote In his "Principles 
of Economics": "Economics may be described as the 
science which teaches us what rules mankind should ob- 
serve in order to advance in material prosperity." ®^ 
The science was held to have a preceptorial value even 
though ethics might dissent from certain applications. 
Dietzel, whose position was that of an eclectic, though 
with a preference for "exact economics," separated ethics 
and economics, but granted that "economic policy must 

«» Page 58. 
" Page 42. 

«« Edition of 1913 by D. C. Heath & Co., p. 2. 

«« Introduction to the Study of Political Economy, transl. by Dyer, L., 
1893, p. 70. 

" Wesen und Aufgaben der Nationalokonomik, p. 21 ; and pp. 93-4. 
*' Wesen und Hauptinhalt der Theoretischen Nationalokonomik, p. 94. 
«» Translation of Wotzel, A. A., 1918, vol. 1, p. 1. 



264* THE DEVELOPMENT OF ECONOMICS 

be understood as applied ethics, and not as an instance 
of applying theory." ^^ 

Among English and American Marginists or Utilita- 
rians making use of Marginal concepts the general atti- 
tude was hostile to moralism. It was insisted pretty 
generally that ethics and economics are two different 
things, not only as regards aims or premises, but fully 
as much as regards method. The prime consideration 
was the need of exactness in science, a corollary to which 
was the exclusion of ethics whose norms did not lend 
themselves to measurement in any way. As Marshall 
put it in his "Principles of Economics": "The greater 
part of those actions which are due to a feeling of duty 
and love of one's neighbor cannot be classed, tabulated, 
reduced to law and measured; and it is for this reason, 
and not because they are not based on self-interest, that 
the machinery of economics cannot be brought to bear 
on them." "^^ Other social sciences, Marshall wrote, deal 
"almost exclusively with the quality of human motive," '^^ 
but economics only with the quantity ; for money measures 
"human motive on a large scale." "^^ 

Keynes a little later closed the question with the words : 
"The object of a positive science is the investigation of 
uniformities ; of a normative science the determination of 
ideals ; of an art the formulation of precepts." "^^ Hence 
economics debarred ethics ; or "if moral judgments are 
expressed they should be regarded as digressions." "^^ 
So also, in America, Davenport in his "Economics of 
Enterprise," 1913: "The economist as such has no cri- 
teria by which to test the worth of what he finds. As 

■"> Theoretische Sozialokonomik, 1895, pp. 29-40. 

"Pages 78 and 83. 

" Page 73. 

" Page 76. See also p. x. 

''* Scope and Method of Political Economy, pp. 35-6. 

" Page 53. 



MARGINI^M 265 

economist his business is solely with the facts," '^^ though, 
on the other hand, "it is for some one to construct an 
economic science adapted not only to the requirements 
of the facts, but to the needs of their amelioration." '^'^ 
And to conclude with Ely and collaborators in "Outlines 
of Economics": Economics "considers ethical and po- 
litical phenomena when these cannot be dissociated from 
economic phenomena, but insists, nevertheless, upon the 
separation of economics from ethics, politics, and soci- 
ology." ^^ 

The main point to be noticed, then, is the unwilling- 
ness of Marginists to identify social science with a the- 
ory of ethics, and this in spite of their sincere desire 
to make economics useful for the population at large 
where possible. The prevailing sentiment was not a con- 
tempt for high moral ideals, but the fear of breaking the 
chains of reasoning that made economics a science. It 
might be, as Fetter wrote, that "in the main economics 
must be understood as a social duty for social ends 
. . . ," ^^ or that, in the words of Wicksteed, "the final 
goal of education and of legislation must be to thwart 
corrupt and degrading ends ... to infect the mind with 
a wholesome scheme of values, and to direct means into 
channels where they are likeliest to conduce to worthy 
ends" ; ^^ but this was far different from assigning to 
economics a definite task as science. 

Field of Marginal Economics. — Its field did not in- 
clude all social phenomena as perhaps the sociologist 
might study them. Utilitarianism had as early as 1881, 

^« Page 30. 

" Pages 528-29. 

'8 Edit, of 1909, p. 675. See also Jobnson, A. S. Introduction to 
Economics, p. 20. 

^' Principles of Economics, vol. 1, p. 9. 

*" Scope and Method of Political Economy in the Light of the Modern 
Theory of Value and Distribution, in Economic Journal, vol. 24, 1914, 
p. 11. See also Clay, H. Economics for the General Reader, edit, of 
1916, p. 18. 



266 THE DEVELOPMENT OF ECONOMICS 

in the person of Archbishop Whately, reduced economics 
to "Catallactics." Aristotle's term "Chrematistics" had 
also been revived; and "Plutology" was suggested as an 
improvement on both. All of these terms had circulated 
before Marginism came into its own. The competitive 
principle had long been heralded as the only one com- 
patible with a program of precise monetary measure- 
ments. What went into the science of economics was an 
exchange-mechanism whose laws could be conveniently 
divorced from other regularities in the body politic. 
The whole problem, we have seen, had been succinctly 
stated and uncompromisingly settled. Yet Marginists 
were glad to bring new data to bear upon it, the upshot 
being a still more emphatic restriction of economics to 
value or wealth relations. 

With this end in view Menger declared that things 
become "economic" when first wanted by man; second, 
capable of gratifying that want through ascertainable 
causal relations ; third, capable of being understood to 
satisfy these wants ; and fourth, legally acquirable for 
gratification of wants, directly or indirectly.^^ If ad- 
mittedly this took care of only one phase of social life, 
Menger could point out that sciences inevitably deal with 
selected aspects. ^^ And besides, the individual was the 
natural unit of society, whence one inferred the possibil- 
ity of explaining fundamental social phenomena by in- 
dividual traits. ^^ The organic concept was not popular 
with most Marginists, nor for that matter was always 
understood. The Utilitarian legacy was an obstacle it- 
self, since it consisted of an individualistic psychology 
whose lessons J. S. Mill had so superbly expounded in his 

«i Grundsatze der Volkswirtschaftslehre, p. 3. 
''Book I, ch. 6. 
»' Page 182. 



MARGINISM 267 

"Logic." It was still the eighteenth century that pos- 
sessed men's minds and prevailed upon them to make the 
associational doctrine the hub of their thinking! Every- 
thing was based on a mechanistic interpretation of con- 
sciousness, at first by premeditation and in perfect good 
faith, afterwards not rarely in forgetfulness, or with 
some doubts as to the validity of the premise. Averages 
thus figured as methodological devices for "lumping" 
variables, for correlating things not strictly speaking 
comparable. Or long-time reckonings slipped in by way 
of elucidation, that is, "representative firms" and tenden- 
cies and aggregates of valuation such as Jevons spoke of. 
Theory of Law in Economics. — Both the idea of finding 
price in averages, and the circumscription of economics 
as a science of exchange ratios, was a necessary result 
of an individualistic outlook. Given the "Analysis of 
the Phenomena of the Human Mind," as James Mill had 
perfected it, the feasibility of a "catallactics" was proven. 
It needed only certain legal rights to fulfill all require- 
ments for an exact science of values. And this is what 
Marginism realized more clearly than any of the older 
systems. Physical facts, as Keynes pointed out, had 
then no part in the survey. ^^ What counted was value, 
and value alone. If Philippovich, therefore, thought the 
task of economics was the study of "regular recurrences 
of economic facts, of their causes and effects not only 
in their mutual interaction, but in their bearing upon 
non-economic facts," ^^ he was heterodox to that extent. 
For like Schumpeter ^^ he was bound to agree that eco- 
nomics deals indeed only with price in one or more as- 
pects. The problem was: Given individuals A, B, C; 
given their value functions I, II, etc., for n goods ; given 

" Scope and Method of Political Economy, pp. 82 and 96. 
85 Grundriss der Politischen bkononaie, 9. edit., vol. 1, p. 41. 
" Wesen und Hauptinhalt, pp. 582-83. 



268 THE DEVELOPMENT OF ECONOMICS 

their ownership of such goods qal, qa2, etc.; find the 
exchange relations pi, p2, etc., at which exchange takes 
place; or find the positive or negative increments dqal, 
dqa2, etc., dqbl, dqb2, etc., which would be added to 
the ownerships mentioned.^^ Put differently, "in its 
theoretical aspects the science of economics is indeed but 
little more than a study of price and of its causes and 
its corollaries. . . ." ^^ It was as definite theoretically 
as sociology was at times supposed to be vague! 

However, this abstraction of economic data from the 
general body of social phenomena brought with it a con- 
ception of law that might have seemed unsatisfactory 
even to J. S. Mill who fought so bravely to have morals 
put on a scientific basis. For unlike the Utilitarian no- 
tion the Marginal tended strongly toward independence 
from all environmental restraints. Mill derived social 
laws from the laws of consciousness and learning, which 
by all of his predecessors had been directly related to the 
outside world, and which to Mill himself were very real. 
The Utilitarian economics therefore had tried to keep 
in touch with actual facts and laws of price or distribu- 
tion became objective in spite of philosophical phenome- 
nalism. 

Something like this view appears in the statement of 
Schonberg, in his "Manual," that "all laws of economics 
are grounded on the fact that what is external in its 
phenomena occurs according to natural laws, represent- 
ing true operating forces, and that the personal psychic 
forces, in spite of variations, nonetheless reflect uni- 
formities not only in essence but also in their eff^ects." ^® 
As long as MilPs psychology was strictly adhered to this 

" Pages 260-61 ; and pp. 129-33. Schumpeter takes a non-causal, 
functional view of pricing. 

*» Davenport, H. J, Economics of Enterprise, 1913, p. 26. See also 
Wicksteed, Pti. H., Common Sense of Political Economy, 1910, pp. 169-70, 
and the same writer's article in the Economic Journal for 1914, vol. 24, 
p. 2. 

«» Handbuch. edit, of 1890, Fol. 1, p. 20. 



MARGINISM 269 

interpretation might be put upon the classic analysis 
of exchange. The "economic man" was real; economic 
laws were real, even if subject to rectification in a par- 
ticular case. There was nothing to controvert the old 
Sensationalistic argument in its psychological aspects, 
unless indeed one took the Kant-Hegelian view of dialec- 
tics which Pareto ^^ for instance used in his "Manual of 
Political Economy," 1909, when delimiting statics as 
a working hypothesis for economics. But needless to 
say, the problem was not so treated by either Utilitari- 
anism or Marginism. 

Instead, Marginism carried the subjectivistic idea of 
knowledge over into the realm of price analysis — some- 
thing that the Utilitarians had not quite dared. The 
tendency before long was very distinctly toward a con- 
ceptual dialectic. In fact as good a logician as W. 
Wundt, whose all-embracing studies entitle him to spe- 
cial consideration, declared in his "Logic," 1883, that 
the task of economics is not "the establishment of laws 
obtaining in a real economy outside, but rather the exact 
definition of economic concepts and of their reciprocal 
relations. . . ." ^^ In other words, economic laws were 
of a somewhat mathematical nature, constructed upon 
idealities, and not directly verifiable by anything oc- 
curring in the phenomenal world. 

Menger in his "Inquiry into the Method of Social Sci- 
ence" of the same year entertained similar notions, and 
for this reason no doubt opened his survey with a dis- 
tinction between three kinds of studies, viz., the historic- 
statistical, the theoretical, and the practical. The im- 
mediate occasion for this assertion was of course his 
desire to expose the weaknesses of the Historical position. 
He felt that Historism struck at the root of social science 

»" Pages 45 and 107. 

" Logik, 2. edit, vol. 2, Part II, p. 518. 



270 THE DEVELOPMENT OF ECONOMICS 

as exact science, and had to be proven wrong and vi- 
cious. Thus his "Inquiry" came to have a very definite 
influence not only upon economists, but especially also 
upon German methodologists. 

In general, what gains were made consisted chiefly of 
a better understanding of the diff^erence between static 
and historical viewpoints, of neatness in mathematical 
presentation, and of tolerance for induction as an aux- 
iliary. Jevons in his "Principles of Science," 1874, said 
nothing of economic methods. Menger shows the influ- 
ence of Ruemelin ^^ and of current German logic,^^ 
though partly by way of opposition. Sax and Philip- 
povich did not at any time go beyond generalities. In 
England Marshall and Keynes were conscious of a seri- 
ous methodological problem, but did not step out of the 
path made by Mill. All in all, the economic literature 
exhibits few signs of acquaintance with the leading 
logical works of the day. It was held, probably, that 
the fundamentals were sufficiently known, or that only 
such phases required special consideration as aided in 
the delimitation of economic research. Psychology for 
this reason was drawn upon more heavily than logic, 
and the familiar dispute about in- versus de-duction took 
second rank to the case of statistics or history versus 
statistic deduction. 

Thus Menger, in beginning with his threefold classi- 
fication, prepared readers for his distinction between in- 
dividual and recurrent events. Economics, he showed, 
dealt with the latter class ; history with the former. 
Science could not be without regularities of sequence or 
of coexistence.^* Laws referred to t^pes of things and 

82 Ruemelin, O. von (Chancellor of Univ. of Tuebingen), Reden und 
Aufsaetze covering the period of 1875-94, in three volumes. Difference 
between deductive and statistical method is specifically brought out. 

o» Wundt's Logik appeared 1880-83. 

9* Untersuchungen, ch. 2. Compare this with Paul, H, Prinzipien der 
Sprachgeschichte, 1880, ch. 1. 



MARGINISM 271 

relations, and these certainly contrasted with things them- 
selves, or with the kind of reality that historians in- 
vestigated. For the past could, as such, give nothing 
but actual occurrences, each of which differed in some 
point from any other. Historians wanted nothing else. 
How could they hope to do more than tell how things 
actually happened, as Ranke had maintained? To phi- 
losophize on chains of incomparable events was a service 
useful to none. On the other hand, to pretend erecting 
a structure of laws (say of progress or of exchange and 
distribution) upon historical data, each group qualita- 
tively distinct from the other, was to misunderstand en- 
tirely the essence of law natural or law social. 

Menger, setting a precedent for later writers, there- 
fore passed over to a statement on the nature of eco- 
nomic inquiry, and in doing so contrasted not merely 
relations of things with the latter themselves, but also 
the two with our concept of them. What Wundt ^^ said 
proved to be nearly correct: Economics was, in a sense, 
a conceptual science on the order of mathematics. No 
one had seen the magnitudes or relations discussed, meas- 
ured, and interlaced in man's mind, but that did not 
prevent us from obtaining inner consistency in our sys- 
tem, or from testing it out under forfeiture of the ab- 
stractions themselves. As Menger acknowledged: "The 
essence of exact science in the field of ethical [i. e. social] 
phenomena consists in that we reduce social phenomena 
to their simplest elements, measure them by a standard 
suitable to their nature, and try to find the laws accord- 
ing to which these elements, pictured as in isolation, 
give rise to more complex social events." ^^ The con- 
stituents were to be determined beforehand partly as gen- 

"Logik, 2. edit, vol. 2. Part II, p. 500. 

»« Untersuchungen, p. 43. See also pp. 77-8, and Book I, chs. 5 and 7, 
passim. 



272 THE DEVELOPMENT OF ECONOMICS 

eral premises, partly as definitions resting on them. 
What did not occur in isolation was to be imagined to 
occur so that, by means of this artifice, certain cal- 
culations might be attempted. Allowances could then 
be made afterwards, the supposition being that all inter- 
ference was exceptional or, if regular, of minor effect 
upon the general course of things. Wundt said that 
economics comprised a system of relations lifted out of 
a larger actual whole, i. e. happenings in the outside 
world, arranged conceptually "in progressive logical de- 
pendence from the least to the most special.'^ ^'^ That is 
what Marginism accomplished in detaching "exact law'^ 
from the unstable correlations before our eyes. That 
was the reason for Menger's remark: Whether the indi- 
vidual factors actually exist in isolation or are really 
measurable exactly is of no importance in social science 
any more than it would be for natural science.^^ In 
other words, though natural science could measure par- 
ticulars actually occurring and social science could not, 
this difference had no bearing on the main argument. It 
still remained for the economist to abstract as he listed, 
so as to be able to develop a self-consistent system of 
thought. Even deductions from premises known to dis- 
agree with particulars had their value from this stand- 
point. The empiric laws of Utilitarianism which roughly 
marked tendencies measurable and true to human nature 
or history were less consequential than a precise formu- 
lation of theorems not concretely verifiable. 

For the rest, laws were approximations only. The re- 
sults of social science differed from those of natural sci- 
ence only in degree. A tendency was aU anybody could 

»'Logik, 2. edit, vol. 2, Part II, p. 500. 
»« Untersuchungen, pp. 45-6. 



MARGINISM 273 

discover, the real causal relation being too complex for 
our means of analysis.^^ 

Statics of Marginism — It followed from this guiding 
principle that economics took a static view of the world. 
There was no possibility of reckoning with all the inter- 
actions as they took place in history, since that would 
involve change everlasting and a loss of the very regu- 
larities science sought to discover. Processes should be 
conceived as an interplay of forces at rest. If the 
equilibrium was disturbed it was not for long, or else the 
process ceased to be a subject for economists. What 
counted was an average of the arithmetical sort, the 
number of items being known by assumption, and the 
lesser magnitudes being purposely left out of the com- 
putation. This was the idea taken over from physics 
during the eighteenth century — a reasoning from anal- 
ogy apparently justified by the facts. For that hu- 
man nature was one with the physical environment and 
that the laws governing the latter also applied to the 
former seemed self-evident ever since the Stoics had 
philosophized and the Cartesians, of several varieties, 
had given British empiricism its impetus. The mind was 
pictured as a sort of parallelogram of forces. Matter 
and motion were facts attributed to consciousness no less 
than to substance. The whole theory of the passions 
gained plausibility from this postulate which could be 
used to satisfy the idealist no less than the materialist 
(in the metaphysical sense). 

Bentham had called his table of the springs of human 
action a "psychological dynamics.'^ Comte had popu- 
larized the Newtonian description of the world in his 
"Positive Philosophy" where "social physics" was the 

»8 Ibidem, pp. 36-7. See also Schumpeter, J. Wesen und Hauptinhalt, 
pp. 191-92, and Keynes, J. Scope and Method, p. 213. 



274 THE DEVELOPMENT OF ECONOMICS 

subject-matter for discussion. True, unlike the Utili- 
tarians and especially J. S. Mill, Comte saw no way of 
separating economics from the larger whole ; nor was he, 
as it happened, a believer in a science of psychology. 
To him physiology was real, but consciousness only a 
convenient term for individualizing social facts. Yet it 
was he above all who encouraged economists to abstract 
statics from dynamics, i.e., from actualities, so that long- 
run tendencies might be isolated. According to our 
French philosopher "social dynamics studies the laws of 
succession, while social statics inquires into those of co- 
existence ; so that the use of the first is to furnish the true 
theory of progress to political practice, while the sec- 
ond performs the same service in regard to order." ^^^ 
His well-known differentiation between order and progress 
was grounded in a recognition of the law of change. 

History had been studied too often by men of great 
speculative power not to be included in an estimate of 
human values. The physical or mathematical concept 
of equilibrium proved extremely useful in a contrasting 
of past and present, of things as they are with things 
as they had been at successive historical epochs. It was 
clear to Comte that human nature must be viewed in both 
lights if the whole truth should become known, and on 
this account he suggested a method of investigation aux- 
iliary to the accepted induction of Francis Bacon and his 
successors. Events were not absolutely alike for any 
length of time, but they could be considered so for an 
instant of time. Social laws were observable as truly in 
the facts before us, as in the stages through which they 
passed weaving the cloth of history. 

Jennings in his "Natural Elements of Political Econ- 

^0" Positive Philosophy, abridgment and translation of Miss Martineau, 
1855, p. 464. Compare this wifli Spencer, H., Discussions in Science, 
Philosophy, and Morals, edit, of 1890, p. 133. 



MARGINISM 275 

omy'^ ^^^ had adopted Comte's notion. J. S. Mill even 
earlier had contrasted a "theory of motion" [dynamics] 
with a "theory of equilibrium" [statics], this latter being 
a "collective view of the economical phenomena of soci- 
ety considered as existing simultaneously." ^^^ Some- 
how the thought of succession was coupled with dynamics, 
and that of coexistence with statics. Pareto in his 
"Manual" wrote : The economic equilibrium is that "state 
which would be prolonged indefinitely in the absence of 
changes for conditions surrounding it." ^^^ The habit, 
for instance, of consuming a half pound of bread daily 
would persist if no forces were brought to bear upon the 
consumer from outside. The average event should en- 
gage the economist, not the tracing of all possible in- 
cursions as a long-time view might reveal them. Thus 
Keynes judged that dynamics deals with the "manner 
in which conditions vary over long periods of time, to- 
gether with the economic changes that ensue there- 
upon." -^^^ More, "the dynamics of political economy is 
exceptional in its almost entire dependence upon an his- 
torical method of treatment," ^^^ while in general the 
economist followed the deductive principle in his inquiries. 
His laws would be the same since interferences with the 
assumed forces amounted to little in the aggregate; only 
the viewpoint was different. In the words of a later 
writer : "There is nothing new but the situation" ; ^°® 
the principle was the same whether exceptions were taken 
historically or not. 

This, to be sure, was not the opinion of every student 
of Marginism. Increasingly during the twentieth cen- 

"1 Preface, p. 30. 
"* Logic, Book IV, ch. 1. 
"» Ch. 3, § 22. 

^<'* Scope and Method, p. 141. 
lo" Ibidem. 

"« Davenport, H. J. Economics of Enterprise, p. 425. See also Clark, 
J. B., Distribution of Wealth, 1899, chs. 15 and 16. 



276 THE DEVELOPMENT OF ECONOMICS 

tury critics made bold to challenge the important con- 
tention that dynamics was to statics what the exception 
was to the rule, as if the first might be with justice 
neglected in the study of economic processes.^^*^ 
Schumpeter, e. g., declared : "The dynamics of economics 
is in every respect something radically different from its 
statics, both as to method and as to contents." ^^^ The 
two should be complements, but they could not be rent 
asunder as if one could do the work of both. Even 
though equilibrium were that "state in which, as long as 
no disturbing factor from outside appears, no leaning 
toward change exists," ^^^ yet, since the interferences 
were continuous, a complete analysis of events involved 
disequilibrium as well. Hence, "in so far as statics is 
merely a logic of economy, it has universal validity, but 
when it professes to give a psychology of the process it 
must prove sadly remiss." ^^^ 

Up to the turn of the century, however, Marginism 
was regularly committed to static interpretations. The 
only concession made was the enumeration of certain 
factors back of dynamics, these factors to receive at- 
tention after the system had been completed, but not be- 
fore. J. S. Mill himself had, as master of logic, pleaded 
for this rule, and relegated his "Influence of the Progress 
of Society on Production and Distribution" to the end 
of his "Principles." J. B. Clark in his "Distribution 
of Wealth," 1899, cited among the dynamic facts : Popu- 
lation, methods of production, organization, capital and 
wants; -^^^ Davenport, in his "Economics of Enterprise": 

^^ See, e. g., Patten's comment on Pantaleoni's dynamic view in Papers 
and Proceedings of the American Economic Association, Series 3, 1910, 
vol. 11, pp. 128-29. 

108 wesen und Hauptinhalt, p. xix. 

i«» Pages 36 and 199. 

"0 Theorie der Wirtschaftlichen Entwicklung, p. 512, note, and pp. 
473-88. See also Anderson, B. M. Value of Money, p. 559. 

"1 Ch. 25. 



MARGINISM 277 

Changes in humanity such as of numbers, wants, and 
capacities, and changes in environment such as in land, 
capital goods, and in loan fund ; ■^^^ and Fetter in his 
"Economic Principles," 1915 : Population, culture, nat- 
ural resources, and technique of production in the widest 
sense.^^^ To this extent then Historism had made its 
point in demanding a broader, less arbitrary, less cock- 
sure treatment of social facts than Utilitarianism had 
granted. A common sense view was allowed after science 
had done with its self-imposed task. Statics conde- 
scended to recognize Dynamics, just as Competition 
treated Monopoly leniently, not to abdicate superior 
rights but to prove its own merits. 

The Method of Marginism. — The question of method 
in the stricter sense was answered in harmony with the 
above views. It was agreed for the most part that his- 
tory and statistics could play only a secondary role in 
the establishment of laws. The principal means was de- 
duction from premises laid down, the premises resulting 
from induction of the sort British empiricists had first 
called "experimental." All the Utilitarians had insisted 
that their postulates were the conclusions, inductively 
arrived at, of a science basic to economics, psychology 
being that science. Mill in his "Logic" had called at- 
tention to this fact and in addition urged the possibility 
as well as the advisability of checking up economic de- 
ductions by the actual facts of a special case. 

The Marginists agreed to these views, but when chal- 
lenged by critics like Ruemelin for excessive abstraction 
added that reasoning from chosen premises did yield 
"constant elements [Grundformen] indicative of mass ef- 

"2 Pages 453-54. 

"' Vol. 1, pp. 400-01. See also Pantaleoni, M., article in American 
Bconomic Association, publications, Series 3, vol. 11, 1910, pp. 113-16. 



§78 THE DEVELOPMENT OF ECONOMICS 

fects in the interaction of psychic forces." -^^^ Jevons 
made of economics a "mechanics of utiHty and self-in- 
terest" in the belief that "the first principles of political 
economy are so widely true and applicable that they 
may be considered universally true as regards human 
nature." -^^^ Or to quote from another page: "That 
every person will choose the greater apparent good; 
that human wants are more or less quickly satiated; 
that prolonged labor becomes more and more painful, 
are a few of the simple inductions on which we can 
ground ... a complete mathematical theory." ^^^ To 
be sure, "the deductive science of economics must be veri- 
fied and rendered useful by the purely empirical science 
of statistics." '^^'^ Induction was an essential in spite 
of its derivation from deduction. However, in the first 
place, "induction . . . can only be performed by the use 
of deduction," ^^^ and in the second place "induction is 
simply an inverse employment of deduction." Jevons had 
been greatly stimulated by the logic of G. Boole, and 
developed further the idea of substitution and quantifica- 
tion by which many logicians have hoped to free their 
work from medieval fetters. But so far as economics 
was concerned this treatment of the syllogism as the 
key to all reasoning gave additional prestige to the ab- 
stract deductive method. Economics on this plan was 
almost certain to become a conceptual science, however 
strong Jevons' conviction that all scientific conclusions 
are but probabilities resting ultimately on the use of 
calculus, and therefore truths whose verification is either 
empirical in the ordinary sense, or else irrelevant. What 
Jevons expected from an averaging of valuations in the 

"* Ruemelin, G. von, Reden und Aufsatze, vol. 1, 1875. 

'"The Future of Political Economy, 1876. 

"* Theory of Political Economy, first edition, p. 24. 

"^ Ibidem, Introduction. 

"» Ibidem. 



MARGINISM 279 

marginal analysis of price is to be understood precisely 
in the light of his earlier work on logic. ^-^^ 

Menger's study of method agrees fairly well with that of 
the English writer, though aiming partly at diiferent 
things. In both cases we meet with appreciative refer- 
ences to the psychological aspects of the question, but 
Menger, mastering a much smaller range of facts, dwells 
especially on the impracticability of Historical ideals 
which resorted so frankly to the principle of enumera- 
tion. Menger at once asks us : Would it be possible to 
prove a single theorem of Euclid by referring to ex- 
periential lines and planes? And the reply of course is: 
No ! Neither then could Historism obtain exact knowl- 
edge by delving into the distant past.^^^ There was no 
such thing as precise measurement; for any correlation 
of economic events, no matter how simple, comprised 
far more elements than man could either detect or ap- 
praise for his purposes. The empirical method, there- 
fore, deserved no serious consideration. As Wieser later 
remarked in his "Natural Value": The laws of value 
"are to economics what the law of gravity is to Mechan- 
ics"; -^^-^ both springing from hypotheses which were be- 
yond explanation. We deduce, but only here and there 
have material for substantiation of claims. 

That is, observation and experimentation had no place 
in economics, first because the subject-matter was un- 
suitable, and secondly because psychology had already 
furnished the data to build with. Pricing could proceed 
on deduction, since feelings or anticipations of pleasure 
and pain engendered the same reactions in all men for all 
times. Regular recurrences expressed in pecuniary ra- 
tios thus were certain; one could proceed from general 

"9 See Jevons' Principles of Science, notably chs. 4, 6, 7, 11, 23 and 31. 
"<• See for instance Menger's Untersuchungen, Book I, ch. 4, 
«i Preface. 



280 THE DEVELOPMENT OF ECONOMICS 

to particular, and the monetary standard would measure 
exactly the preferences exchanged. This was the at- 
titude of Marshall ^^^ and of Keynes,^^^ of Pierson ^^* 
and Philippovich ^^^ and other exponents of Marginism. 
Keynes, of course, saw the value of variety in research. 
He thought: "According to the special department or 
aspect of the science under investigation the appropriate 
method may be either abstract or realistic, deductive or 
inductive, mathematical or statistical, hypothetical or his- 
torical." ^^^ But this was merely a defence for com- 
bining methods that differed in their appraisal of facts 
more than in principles of reasoning. These latter 
were not seriously examined by any of the Marginists 
or by men dealing with Marginism. It was natural for 
Keynes to mention four fundamentals in economics, and 
then to defend deduction as the method. Thus he writes : 
Maximum satisfaction "with the smallest possible sacri- 
fice, the law of decreasing final utility as the amount of 
commodity increases, the law of diminishing return from 
land, and the like, are premises which possess the requi- 
site degree of universality" for deductive reasoning.-^^"^ 
Bagehot's essay on postulates in economics was agreeable 
to Keynes, though he confessed, by way of qualification, 
that "the validity of economic postulates varies not only 
from time to time, and place to place, but also in differ- 
ent connections at the same time and place."^^^ Any 
Marginist, however, might have granted this without 
abandoning the deductive method, for his system was 

122 Principles of Economics, pp. 74-77. 

1" Scope and Method of Political Economy, ch. 6. ^ ^ , » » 

«* Pierson, N. G. Principles of Economics, transl. by Wotzel, A. A., 

vol. 1, Introduction. . ^ ,.^ , .. ao An. cs« 

""Grundriss der Politischen okonomie, 9. edit., vol. 1, pp. 46-4». bee 
also Dietzel, H. Theoretische Sozialokonomik, pp. 94-96. 

"0 Scope and Method of Political Economy, p. 30. 

"^ Page 227. 

«» Page 228. 



MARGINISM 281 

avowedly built, not on conditions for all times, but on 
such as prevailed for the moment. 

The methodological question was not whether certain 
assumptions were perennially valid, but whether per time 
and place they answered a need, being sufficiently true 
to facts under investigation to warrant our using them, 
so that the conclusions could be proclaimed as laws re- 
gardless of minor fluctuations. And this Marginism de- 
sired to demonstrate. Deduction became both worth while 
and necessary because of the laws of valuation. No other 
approach compared favorably with this one, not even 
the statistical, and that chiefly "because of the plurality 
of causes and the intermixture of eff^ects" ^^^ whose sig- 
nificance J. S. Mill had been the first to stress. Pierson 
agreed with Keynes, since "reasoning or — to use a tech- 
nical expression — deduction is the only method by which 
successful results can be obtained in the tracing of eco- 
nomic laws." -^^^ Philippovich, like the rest, separated 
in- and de-duction mainly in order to advocate the latter, 
and American Marginists usually followed in practice, if 
not in theory. 

Note on Mathematical. Economics 

It was natural enough that mathematics should play 
a part in economics as soon as it was realized that quanti- 
ties of an economic sort existed and were functionally 
related. The change from Physiocratism to Smith's em- 
phasis on price and income was itself a bid for exact 
measurements and their graphic presentation, and when 
under Utilitarianism and Marginism this distributive fea- 
ture became the central topic, the mathematical princi- 

"» Page 198. 

"0 Grundriss, 9th edit., vol. 1, p. 33. 



282 THE DEVELOPMENT OF ECONOMICS 

pie of coordination could scarcely have been long over- 
looked. However, it was not Marginism that introduced 
this thought, nor was there anything in the mathematical 
method to require a theory of margins. The first requi- 
site rather was a suitable set of symbols, an annotation 
capable of expressing precise relations of magnitude, and 
in the second place perhaps some such visualization as 
Descartes made possible by his invention of analytic 
geometry (1637). To use lines and figures instead of 
letters in an equation might prove advantageous, once 
the concept of variables in correlation was understood. 
The calculus of variation has been defined as "a method 
of finding curves having a particular property in the 
highest or lowest degree." It needed no long argument 
to show the applicability of such measurements to mone- 
tary values. 

Cournot in his "Researches into the Mathematical 
Principles of the Theory of Wealth," 1838, did not try 
to defend his innovation, but simply pointed to the fact 
of value as a ratio, to equations of exchange, and to sym- 
pathetic movements of price as the best possible material 
for a mathematical method. Annual demand, he said, is 
"for each article a particular function of the price of 
such article." ^ And "just as it is possible to make an 
indefinite number of hypotheses as to the absolute motion 
which causes the observed relative motion in a system of 
points, so it is also possible to multiply indefinitely 
hypotheses as to the absolute variations which cause the 
relative variations observed in the values of a system 
of commodities." ^ Whewell treated some of Ricardo's 
theorems mathematically in 1829. Carey on different oc- 
casions approved of the idea, and in his "Unity of Law," 

* Translation of Bacon, N. T., 1897, ch, 5, § 21, 
2Ch.2. 



MARGINISM 283 

1872, wrote: "Mathematics must there [In social sci- 
ence] be used, and the more it is used the more must 
sociology take the form of a real science. . . ." ^ Mac- 
Leod in his "Principles of Economic Philosophy'^ had 
said: "The pure science of economics is capable of rig- 
orous mathematical demonstration.'' ^ 

On the one hand, then, the use of mathematics ante- 
dates Marginism, while on the other it was by no 
means common among the Marginists. The bulk of 
treatises and periodic literature either waived the ques- 
tion, or employed annotation and graphics sparingly. If 
Jevons and Gossen and Walras set a precedent for their 
own school, so did Coumot, Colson, Pareto, and Pan- 
taleoni for economists of a different persuasion. The real 
question was not whether economic magnitudes, correla- 
tions, and other principles might not be adapted to such 
treatments as mathematics stood for preeminently, but 
what precisely was the nature of a mathematical method, 
what its bearing upon the methodology of social science. 
And on this important matter opinions were divided. At 
different time's economists meant hy the mathematical 
method either deduction as such, or any tise of algebraic 
symjbols or of graphs, or coordinations of two or more 
vuriahles of a simple kind, or merely an^ exact measure- 
ment of magnitudes. 

Men like Bernouilli and Hume, for instance, called 
social science mathematical because it proceeded deduc- 
tively, while natural science according to Bacon rested 
on induction. Even J. S. Mill used the word mathe- 
matical occasionally in this sense. Jevons took more 
nearly the last interpretation given, in that he divided 

5 Page 65. See also Manual of Social Science, a condensation of same 
writer's philosophy by Kate McKean, 1866, p. 31. 

* Second edit., vol. 1, p. 124. For view of W^alras (L.) see his Ele- 
ments d'Economie Politique Pure, edit, of 1889, p. vii. 



284 THE DEVELOPMENT OF ECONOMICS 

all sciences into the logical and mathematical. He wrote 
in his "Theory of Political Economy": "There can be 
but two classes of sciences — those which are simply log- 
ical and those which, besides being logical, are also mathe- 
matical." ^ Economics, it need hardly be mentioned, was 
of the latter variety, but it was at the same time ad- 
mitted that "equations expressing the laws of supply 
and demand . . . have a complexity entirely surpassing 
our powers of mathematical treatment." ^ His "Prin- 
ciples of Science," brings out very clearly the limits of 
the mathematical method in economics ; certainly much 
more so than his "Theory." In fact, we are reminded 
of our ability to reason mathematically without taking 
recourse in symbols,*^ even without believing in a precise 
correlation of an indeterminate number of variables. 
Jevons thus distinguished between inference and measure- 
ment, but was misled by a faulty psychology. 

The majority of Marginists defended mathematics 
from either the logical or the practical standpoint. That 
is, they recommended the use of algebraic symbols and 
graphs when not sure of the possibility of exact meas- 
urements, nor perhaps of the adequacy of coordination 
for economic ends. In both cases the mathematical 
method was said to be used, the term thus having a vague 
meaning that only served to render more difficult a final 
decision on the subject. Yet it had been the belief of 
many Utilitarians that mathematics was ill-adapted to 
economic purposes. Rau and Thuenen for instance 
granted the convenience of mathematical abbreviations, 
but no more. Roscher thought human interrelations too 
complex to be treated by Descartes' geometry.^ Comte, 

= Ch. 1. 

« Principles of Science, 3. edit, p. 759. 
' Theory of Political Economy, Introduction. 

8 Principles of Political Economy, transl. by Lalor, J. J., 1878, Intro- 
duction, cli. 3, § 22. 



MARGINISM 285 

J. S. Mill, and Leslie sided with this view. Ingram wrote : 
"Mathematics can indeed formulate ratios of exchange 
when they have once been observed ; but it cannot by any 
process of its own determine those ratios; for quantita- 
tive conclusions imply quantitative premises, and these 
are wanting." ^ Cossa declared the mathematical method 
to be a mere "convenience of applying to our science the 
figures and symbolic forms which are frequently found 
useful in purely deductive sciences. . . ." ^^ Keynes 
thought that "the mathematical methods in economics 
fall into two subdivisions, the algebraic and the diagram- 
matic," ^^ but shows his essentially anti-mathematical 
leaning by the very statement made. 

So far, of course, the instances have been taken mainly 
from Historism or Utilitarianism and it might hence ap- 
pear as if Marginism stood solid in its defense of mathe- 
matics. Yet that is not so. Marshall, for instance, ap- 
preciated the value of margins, but said also: "The 
chief use of pure mathematics in economic questions seems 
to be in helping a person to write down quickly, shortly 
and exactly some of his thoughts for his own use. . . ." ^^ 
The French Marginist Aupetite confessed that mathe- 
matical economists ^'do not know exactly what it is that 
binds the function and the variable together, or the in- 
tensity of the satisfied need to the quantity already con- 
sumed" thus disavowing causality.^^ And Pierson deemed 
mathematics of no greater value than lay in its afford- 
ing us "an excellent means of testing our conclusions, 

9 History of Political Economy, edit, of 1888, p. 182. 

^0 Introduction to the Study of Political Economy, transl. by Dyer, L., 
p. 44. 

" Scope and Method of Political Economy, p. 238, note. 

^^ Principles of Economics, Preface to first edition. 

" Thgorie de la Monnaie, p. 42. See also opposing view of Leroy 
Beaulieu, P., in his Traite, 4. edit., vol. 1, pp. 88-92. 



286 THE DEVELOPMENT OF ECONOMICS 

by seeing* whether they can be set forth in a diagrammatic 
form." 1^ 

Without going further into the subject, one can gather 
sufficiently from the above quotations what economists 
meant by a mathematical method, and to what extent 
they understood the issue ultimately involved. Evidently 
no keen desire was expressed to differentiate between cor- 
relation and causation, averages and individuals, con- 
ceptual or»empirical laws, questions of verification versus 
proof in the* abstract, and so on. The general feeling 
was one of kindliness toward the science which had more 
than any other set up syllogisms and systems. Margin- 
ism was akin to mathematics in this respect. The ex- 
pression of a coordination was put in lieu of its explana- 
tion. Exchange ratios being given, a means was desired 
for tracing their changes graphically on paper, and this 
led to the use of analytics. A clear-cut objection like 
Ingram's was exceptional, and besides directly antagonis- 
tic to the whole view of society and of economic proc- 
esses that Marginism had espoused as the alone scientific. 
Marginists consequently found much that was worth while 
both in the form and in the substance of mathematical 
inquiry. 

"Principles of Economics, transl. by "Wotzel, A. A., vol. 1, pp. 21-22. 



CHAPTER EIGHT 
MARGINISM (Continued) 

n. Principles 

Preliminary Observation. — The definitions and laws of 
Marginism, which together may be said to constitute its 
principles, were of course based on its premises. The 
same circumstances that gave Marginism and Utilitarian- 
ism premises in common also gave them a similar super- 
structure; for Marginism was a reaction against His- 
torism primarily, not against what was fundamental in 
the classics. It was clear from the start that the Mar- 
ginists would take over the bulk of English doctrines, 
including certain premises and definitions, and not ex- 
cluding altogether even the objective norm of measure- 
ment which had its inception in seventeenth century studies 
of price. 

But what especially enables us to trace a clear line of 
descent is the entrepreneur view of economic organiza- 
tion, which Adam Smith had qualified somewhat by his 
half theological, half ethical background, and which Mar- 
ginism took over unreservedly from Utilitarianism in the 
form it there first assumed. The captain of industry was 
plainly at the center of affairs. The appraisal made by 
the employer figured prominently in the analysis of price 
and income as offered by both Utilitarian and Marginal 
economists. The competitive scheme which rested on 
legal axioms relative to property, contract, and vocation 

287 



288 THE DEVELOPMENT OF ECONOMICS 

was taken for granted as not only the type of existing 
social order, but as something perennial and universal. 
Marginism consequently had no quarrel with the general 
drift of Utilitarianism. What it proposed to change, and 
did change, was the standard of measurement for ex- 
change ratios, and the explanations given for the nat- 
uralness of the pricing and distributing process under in- 
vestigation. On this account mainly Marginism formu- 
lated tenets and definitions underlying them which at 
first sight might appear a radical innovation for all their 
kinship with older beliefs. 

Definitions. — ^Value was given two different meanings, 
namely, first a purely psychological, and secondly a 
commercial. From the former standpoint the cardinal 
fact was man's ability to feel and judge and express his 
ideas in outward acts. Value was an act or a state of 
consciousness, an imputation of qualities to things or 
deeds, a manifestation of history that changed environ- 
ment and endeavor. The eighteenth century thinkers had 
talked as if utility were something inherent in things. 
Not that the foremost philosophers, either empirical or 
transcendental, had given one that impression. Hardly! 
But among economists the stress upon things was so com- 
mon as to permit the charge later made. Hence toward 
the beginning of the next century critics went out of 
their way to denounce the claim of "absolute" value, 
meaning that utility is not an inseparable part of goods 
in the market. During the last generation, however, the 
word "absolute value" has come into use again, and now 
we contrast it with exchange-ratios which to orthodox 
Marginism were the only values of economics. The act 
of imputation was studied, ^he subjective nature of 
value seemed obvious, even if much was said about 
it. But it was in most cases added that while valuation 



MARGINISM 289 

formed a notable part of psychological analysis, the im- 
mediate concern of economists was value as exhibited in 
exchange. Jevons was not without reason persistent in 
his reiteration of this familiar fact, for according to 
Marginism everything depended on our having an index 
of those psychological forces that Hume and Mill had 
tried in vain to subject to experimental methods. Ratios, 
not absolutes ! Fractions, not entities ! Differentials, 
not totals ! Margins, not initial response or satisfac- 
tion! Here were contrasts to conjure with and to ex- 
ploit in a scheme of pecuniary comparisons. 

What measured utility was want, and want itself served 
as a key to pleasure and price. Utility was anything 
capable of gratifying any want whatsoever — a notion 
warmly welcomed by the Utilitarians in their own in- 
quiries. Scarcity was insufficiency of supply relative to 
demand under given circumstances at a fixed time and 
place. If things tangible or intangible were useful and 
scarce, and transferable by enactment of law, they be- 
came valuable by that fact. Moral questions, as we 
have seen, had no part in this diagnosis. The existence 
of a monetary standard was reckoned with, but not 
logically necessary, for in exchanging one unit of a good 
for units of another a price at once emerged, the ratio 
being just as real that way as when money intervened 
because of the economy attained in introducing a gen- 
eral denominator. 

The force of the new concept lay in its independence 
of old-time costs. Cost now was no original element in 
value. Cost had to be explained through supply, if a re- 
lationship was desired. Concrete objects ceased to be the 
sole subject for measurement. Stuff was in no wise in- 
volved, except incidentally. The logician could argue so, 
even if governments and sociologists wondered at the re- 



290 THE DEVELOPMENT OF ECONOMICS 

suits. Goods, however, were known to be ephemeral or 
durable. Some could be used only once; others many 
times. Some deteriorated physically while, or without, 
being used; others might remain intact in any but the 
economic sense. Furthermore, some values depended on 
the existence of a single article or service, while many were 
"complementary," as for instance the parts of an auto- 
mobile or of any combination of things in production and 
consumption. 

Wealth was a fund of values rather than a conglomera- 
tion of things physical. Nothing mattered from the in- 
dividual viewpoint except a possession of values, now 
simply rights to things, now imbedded in tangible assets. 
A difference between private and social norms of ap- 
praisal was admitted as frankly by the Marginists as 
by Utilitarians from Say and Lauderdale up, but their 
choice lay, nevertheless, with the former. Non-pecuniary 
values, i.e., utilities or wealth not marketable or not at a 
given moment part of open market operations, were shut 
out of the system. They could be considered as extra- 
neous matter or data furnishing sidelights on economic 
problems proper, yet the line between the two was hard 
and fast. The definition of production proved this con- 
vincingly. 

Production consisted of a creation of values. The 
Utilitarians popularized this idea, and many half-hearted 
critics of both Mill and Marginism assented to it. Thus 
Gide, in commenting on the errors of Physiocratism, 
writes : "The essence of production is not the creation 
of matter, but simply the accretion of value." ^ Pre- 
cisely so. Any addition to values individually owned 
formed for that owner a proof of production. The act 

1 Gide, Ch., and Rist, Ch., History of Economic Doctrines, transl. by- 
Richards, R., from French edition of 1913 ; p. 16. 



MARGINISM 291 

of production was the act of acquisition itself so long 
as legal limits were observed. Stuff might be a conditio 
sine qua non for collectivists ; Marginism was not blind 
to this fact. But what counted in its analysis was crea- 
tion of values, value being previously defined. Produc- 
tion consequently need involve only a sale of rights, as 
in the lending out of wealth. No manual or mental labor 
was necessarily implied. An individualistic standard 
could dispense with such presuppositions. And similarly 
productivity was a rate of production per one or more 
of several standards ; perhaps per population, or per 
time unit, or per monetary values spent. It mattered 
not, though ordinarily, and again in conformity to 
premises, productivity could mean no more than rate of 
production (income) per unit of expense (outgo). The 
rest encroached upon the exchange mechanism. 

Capital had long been defined in either a stuff or value 
sense. Boehm-Bawerk astonished his readers by the long 
list of interpretations collected and collated with much 
assiduity. As he showed, though not without having 
others to guide him, rights could not be included among 
the wealth of a nation under any but the competitive 
standpoint. The Historical group and the Katheder- 
Socialists had devoted considerable time to this ques- 
tion. As part of their regular work men like Wagner, 
Schmoller, and Ely ^ went into the history of property 
and contract, making clear their relation to any one sys- 
tem such as Utilitarianism, and honoring thereby some of 
the thoughts so predominant in Marx. Capital, Boehm- 
Bawerk said, "we shall call a group of products which 
serve as means to the acquisition of goods." ^ Capital, 

2 Property and Contract in Their Relation to the Distribution of 
Wealth ; two volumes, 1914. See also Boehm-Bawerk, E. von. Rechte und 
Verhaltnisse vom Standpunkte der Volkswirtschaftlichen Gtiterlehre, 1881. 

3 Positive Theory of Capital, transl. by Smart, W., 1893, pp. 38 and 59. 



292 THE DEVELOPMENT OF ECONOMICS 

said Philippovich, is "a power to earn expressed in terms 
of money." ^ Capital, conceded Davenport, is "wealth 
held for increment ; . . . wealth in time," ^ etc. 

Capital, in other words, originated independent of 
labor or savings, or at any rate could so originate. It was 
a fund of values due perhaps to appreciation or to acquisi- 
tion of privilege unexpected by the benefitee. Capital 
was a fund of values like wealth, but with this difference 
that it must be employed productively, production hav- 
ing been defined before. Since production involved crea- 
tion of values, and since values were subjective, imputed 
by man in time and space, it followed that productive 
use also was an instance of imputation, something ex- 
ternal to the thing itself, even if perchance it did take 
tangible form. Items of wealth were capital according 
to whether a profit would ensue in the course of the em- 
ployment of such wealth, or not. Publicly owned wealth 
was not, under this caption, "capital," nor goods used 
within the privacy of a home. But transferred to a busi- 
ness unit, or temporarily utilized in activities making 
matter for exchange the same wealth was capital. Suc- 
cessive incomes or rights to income could be added to 
constitute capital. Capitalization was an act of com- 
puting such rights according to certain principles. 
What had no substance might yet be all important. 
What was not yet, could nonetheless create capital, as 
when rights to goods not yet available provided a basis 
for capitalization. And withal, from the personal stand- 
point, the value of rights or things varied inevitably with 
the value of their products in concrete or inconcrete 
shape, so that not only the cause, but also the measure 

* Orundriss der Politischen okonomie, 9. edit., vol. 1, p. 37. 
5 Value and Distribution, pp. 146-47. 



MARGINISM 293 

of capital was a pending income, a hypothetical or actual 
right (in the future) to goods. 

The notion of cost — ignoring for the nonce the inter- 
esting fact that the word and idea lingered in the Mar- 
ginist's mind — accorded well with the definitions just 
given. Costs were under ideal circumstances outlays of 
value, estimated now as of the present or near future, 
now as of the time they occurred. Money would meas- 
ure the costs, though not necessarily. Loss of oppor- 
tunity also figured as cost, that is if a larger potential 
gain was forfeited for a smaller actual one. Labor-pain 
was cost, and lastly, too, the pain of abstinence or of 
anticipation which was somehow, implicitly, contrasted 
with the joy of realization. Impatience was a cost, it was 
argued. It had to figure in price, business accounting 
leaving no option in this matter. It was granted, how- 
ever, that, as to labor-pain, consumption utilities should 
offset it, this being an object of solicitude for both 
Gossen and Jevons, and indeed for others more recently. 

When it came next to defining the terms relating to 
the marketing process a market was regularly defined 
as something like a meeting-place of buyers and sellers. 
On the question of demand a split occurred because some 
held it to be simply want accompanied by purchasing- 
power, while others thought of it as an off^er of a definite 
sum of values for the things to be bought, and others 
still as the purchase itself. It was asked: Was there 
any "demand" if nothing was really bought.? The re- 
plies varied.^ 

Supply, however, seemed less elusive a term. It figured 
as offer of values for sale at certain prices, not neces- 
sarily at only one price. Consumption was the destruc- 

« For double meaning of the term see, e. g., Fetter, F. A. Economic 
Principles, 1915, vol. 1, p. 46. 



294 THE DEVELOPMENT OF ECONOMICS 

tion of values either with or without use, agreement on 
this point never having been reached. That depreciation 
alone counted, and not deterioration, was self-evident. 

However, what of the place of consumption in the 
Marginal scheme? In the opinion of some its definition 
was the hardest part because of uncertainty as to its 
role in economics. Sax for instance wrote: "Consump- 
tion as such isn't part of economics, though the economic 
process involved must be." ^ Pierson believed : "There 
is no such thing as a theory of consumption in the sense 
of a branch of the science of economics." ^ Schumpeter 
shared this view which had long been advanced by promi- 
nent Utilitarians.^ On the other hand, Jevons was 
anxious to show that "the whole theory of Economy de- 
pends upon a correct theory of consumption," ^^ while 
Keynes declared: "A true theory of consumption is the 
keystone of political economy," not denying that it would 
be a premise rather "than constituting in itself an eco- 
nomic law or laws on a par with the laws of production, 
distribution, and exchange." -^^ Some of the best-known 
Marginists, especially those with a critical penchant, de- 
veloped the concept of consumption into something al- 
together separate from the psychology of valuation, or 
if not, thought of consumption in connection with price 
analysis rather than of the aspects most natural to a 
collectivistic philosophy. Consumer's rent also loomed 
up as an item in the subject mainly because total utilities 
were compared with marginal ones, these latter further- 
more becoming determinants of price. 

The productive machinery turned on four factors 

^ Wesen und Aufgabe der Nationalokonomie, 1884, p. 19. 

8 Principles of Economics, transl. by Wotzel, A. A., edit, of 1913, vol. 
1, p. 42. 

® Wesen und Hauptinhalt der Theoretischen Nationalokonomie, p. 585. 
See also Table Two of this book. 

" Theory of Political Economy, ch. 3. 

" Scope and Method of Political Economy, p. 107. 



MARGINISM 295 

which might or might not be living or inert elements,. 
For production being defined, a "factor" of production 
was any instrument for income. Either a right or an 
active agent constituted a "factor." Labor was one, and 
"whatever effort serves the acquisitive end is labor." ^^ 
Productive effort was another characterization of labor, 
but too general when distribution had to be discussed. 
Land was of course in one sense a physical item. All 
matter like soil or timber or water-falls or minerals in 
the bowels of the earth constituted such a factor. But 
sites and rights might be "land" just as well. And enter- 
prise — to conclude our survey — consisted of the manage- 
ment of the other three factors, the share for this agent 
being a peculiar compound of several values, not all of 
which could always be brought under the headings al- 
lowed. 

Laws of Marginism : Production. — The laws that Mar- 
ginism derived directly from these definitions with the aid 
of certain environmental studies related naturally to pro- 
duction, price, and distribution. Occasionally the same 
principles were discussed under Exchange or under Con- 
sumption, notably when the strictly static competitive 
viewpoint gave way to a dynamic and social one. How- 
ever, it became clear after a generation of analysis that 
nothing essentially new in the shape of laws could be 
added to what Utilitarianism had discovered. Explana- 
tions deviated from the customary, but the law itself 
either remained the same or was reinterpreted so as to 
cover more than first suspected. 

As to production, the physical aspect was not ignored 
by Marginists any more than by Utilitarian economics. 
Because of the relation between supply and population, 
and between supply and price both groups busied them- 

" Davenport, H. J. Economics of Enterprise, p. 127. 



296 THE DEVELOPMENT OF ECONOMICS 

selves with productivity in terms of materials or services 
as such. But what had happened even before the days 
of Marginism happened again, namely, the law which by 
the earliest writers had been supposed to be peculiar to 
agriculture was shown to apply everywhere. Increas- 
ingly it came to be understood as a criticism of the Utili- 
tarian laws of distribution that the idea of diminishing 
returns was merely a piece of fiction due to the assump- 
tion of one single use of the soil. Diversified agriculture 
and the natural course of improvements, it had been 
pointed out even by Rae and Carey, would counteract 
much of the lamented stinginess of nature. However, 
the main contribution of Marginism lay not in this un- 
orthodox treatment of a static concept, but in the de- 
monstration that the law of diminishing returns, the 
return being a fund of values, really comprised the two 
laws of the proportionality of factors and of "advantage 
and size." That is, any one of any given number of 
agents in a productive process could be increased so that, 
beyond a certain point, the total monetary return was 
less than proportionate. Disproportionate outlay in this 
sense attended all efforts to add to any one factor in- 
definitely. What was true of capital was true of land or 
of labor or of enterprise. 

Laws of fatigue and of diminishing utility helped to 
suggest this rather obvious principle. The notion of 
capital as a fund of values convertible into many specific 
forms of wealth was a further help in the right direction. 
Mobility here meant for the extension of the law of de- 
creasing productivity what earlier it had been to the 
establishment of a single price for any one article or 
service under perfect competition. But of course what 
the restatement really implied was that there was only 
one best way of doing things. An Absolute always may 



MARGINISM 297 

be predicated even though practice knows only approxima- 
tions ! Since production almost invariably involved the 
use of more than one "factor," even as Marginism under- 
stood the word, the problem was to find a right propor- 
tion for each and all of such factors. Under communism 
such as Wieser liked to imagine, in order to elucidate his 
value theorems, the ratios would be of stuff more than of 
values predetermined. It was simply a matter of dis- 
covering the recipe by which the cake could be baked 
best. In the midst of competitive conditions as Mar- 
ginism postulated them, on the other hand, the pecuniary 
norm would be decisive. The law of proportions was 
observed when any one producer had obtained a maximum 
product respectively profit at a given time and place, 
everything being reckoned by dollars and cents. The idea 
of balanced rations in consumption therefore, which 
German Marginists had in 1889 ^^ broached, took on a 
new aspect when transplanted to the field of production. 
The Italian economist Pantaleoni (not altogether given 
over to the Marginal idea !) remarked in his "Pure Eco- 
nomics," 1889: "If all the complementary commodities 
requisite for the production of a direct commodity are 
present in different quantities, the quantity of the com- 
plementary commodity that is present in a lesser quantity 
than any other, is that which determines the quantity 
that can be produced of the direct commodity in ques- 
tion, the superfluous quantities of the other complemen- 
tary commodities being, for this purpose, destitute of 
utility." ^* This declaration, though stressing subjective 
facts in the appraisal of goods, was an earnest of what 
was soon to follow when Marginism passed over into 
American hands. Pantaleoni and Pareto, the formulator 

1* Auspitz, R., und Lieben, R. Untersuchungen ueber die Theorie de3 
PrGiSGs PRrt IV 

i* Pure Economics, transl. by Bruce, T. B., 1898, p. 83. 



298 THE DEVELOPMENT OF ECONOMICS 

of the law of "the variability of coefficients of produc- 
tion," -^^ anticipated the more perfect treatments of the 
next decade. 

What became of diminishing returns is easily seen if 
one remembers that value-creation rather than stuff- 
conversion figured as production, and that value or price 
had both been made functions of supply no less than of 
demand, even by Utilitarians. The law of proportions 
was a functional view of returns, just as Walras had 
correlated supplies of a variety of goods with particular 
demands, and Wieser several uses of one and the same con- 
stituent with the price of lowest use in any one article. 
Any factor, nay, any physical item in the whole set oper- 
ating jointly for the creation of a value, was subject to 
a degressive or regressive rate. A simple formula could 
take care of the situation if the number of factors were 
not greater than that permitted by Marginism. It would 
read: "If x with y will produce p; then ax with y will 
produce more than p, but less than ap; and x with ay 
will produce more than p, but less than ap." ^^ And the 
law of size would call attention either to the possibility 
of rising returns in any industry (technologically meas- 
ured), or to the mere difference between ratios and ag- 
gregates of factors used. The technological phases of 
course need not occupy the Marginist, but he should know 
that "the most profitable size for the establishment is 
that under which the marginal product of all the factors 
combined will just equal their cost." ^"^ [Italics mine.] 

Price. — The price analysis of Marginism was com- 
pleted before that of productiveness or distribution. 
The founders had said little on production, and no more 

^5 Manuel d'ficonomie Politique, French translation of 1909, ch. 5, § 76. 

" Carver, Th, N. The Distribution of Wealth, 1904, p. 86. 

" Ibidem, p. 90. See also Davenport, Economics of Enterprise, ch. 23. 



MARGINISM 299 

than outlined the applications of marginal utility to in- 
comes. Their price, however, was essentially that of the 
next quarter century. For both the dissection of joint 
values and the reduction of cost to utility was work 
voluntarily assumed by Jevons and Menger. The key- 
note was this sentence of Jevons that "labor once spent 
has no influence on the future value of any article." ^^ 
Things and thoughts, i. e., goods used in production and 
demands growing out of feelings or valuations, should 
be kept absolutely distinct. The task of the economist 
was not the establishment of ratios of materials or of 
labor-times, but of wants of different intensities. Con- 
sequently, no matter what might be said of costs, wants 
lay at the bottom of every price and income. 

The premises were the hallowed competitive ones which 
fitted in so admirably with Benthamism and Association- 
ism. Wieser, to be sure, developed his "Natural Value'' 
on a fictitious communism, but that was only because he 
never reached beyond valuation and imputation. He gave 
the psychology of wanting and estimating the ingredients 
of an ensemble, and showed how the attribution of exact 
values to each of several joint items in a commodity might 
bear on the analysis of income. But there he stopped. 
"Natural value shall be that which would be recognized 
by a completely organic and most highly rational com- 
munity." ^^ Ignored were "the actual imperfections of 
valuation, the individualism of our economy, and finally 
the inequality of wealth," ^^ probably for the simple 
reason that "the question how it is possible to unite those 
divergent individual valuations into one social valuation 
is one not to be answered quite so easily as those imagine 

"Theory of Political Economy, 3. edit, p. 164, 
"Translation by Malloch, Ch. A., edit, of 1893, p. 61. 
20 Ibidem, p. 282. 



300 THE DEVELOPMENT OF ECONOMICS 

who are rash enough to conclude that price represents the 
social estimate of value.'^ ^^ 

To another Marginist in America the competitive 
postulate therefore was preferable if one could eliminate 
all minor disturbances. And so we are told: "Reduce 
society to a stationary state, let industry go on with 
entire freedom, make labor and capital absolutely mobile 
— as free to move from employment to employment as 
they are supposed to be in the theoretical world that 
figures in Ricardo's studies — and you will have a regime 
of natural values^' ^^ [italics mine]. The dynamic view 
deserved mention, but failed to be systematized even when 
promised. The static individualistic view alone satisfied 
the requirements of an exact economics. Valuations 
could thus only be translated into prices; and costs 
would represent but the obverse side of the coin. "The 
law of costs," wrote Wieser, "is the general law of values 
looked at from a particular angle." ^^ 

Wants were everything. Wants graded into many 
intensities per moment or over a period of time, say in 
an act of consumption. Margins of utility were tanta- 
mount to margins of value as the economist studied them, 
i. e., to exchange ratios or prices. Since all units in a 
homogeneous supply were practically interchangeable, 
(when at all distinguishable physically) any one might 
take the place of another, and the degrees of satisfaction 
accruing from the use of each, though differing to the 
consumer as he added successively one to the other dur- 
ing consumption, could be made alike for all when the 
order of use was changed. Hence "the value of a supply 
of similar goods is equal to the sum of the items multi- 

21 Ibidem, p. 52. 

22 Clark, J. B. The Distribution of Wealth, 1899, p. 29. 

23 Ursprung und Hauptgesetze des WirtschaftMchen Werthes, p. 159. 



MARGINISM 301 

plied by the marginal utility." ^* The exact determi- 
nants of a price consisted of the number of dealers in 
the transaction, of the intensities of want, and of the 
amount of goods for sale. The question of causation 
might be ignored as something outside the pale of eco- 
nomic inquiry, — a point that had not been granted at the 
outset ! — but the possibility of exact measurement 
would remain incontestable. "Price is always equal to 
the reciprocal value of the marginal utility ratio of ex- 
changed goods." ^^ "A logical market-price is that price 
common to all trades made at the time, which permits 
the maximum number of transfers with some gain to both 
parties," ^^ the gain being such as followed from an ex- 
change of different preferences with respect to any one 
or to several commodities. "The value of a unit of any 
commodity depends upon the supply of the commodity 
and the demand for it, varying inversely with the supply 
and directly with the demand, the supply being defined 
as the amount on hand, or available at the time and 
place; and the demand being defined as the desire for 
the commodity coupled with the ability to purchase 
it." ^^ "The price finally established is the money equiva- 
lent of the marginal utility of the good to the buyer 
who is just willing to pay that price, whom we may con- 
veniently designate as the marginal buyer. Who the 
marginal buyer shall be depends of course on the supply 
price scale for the particular good as well as on the de- 
mand price scale." ^^ Prices themselves, in other words, 
helped to determine supply and demand. 

The causal relation between demands and supplies, as 

2*Wieser, F. von, Natural Value (transl. by Malloch, Ch. A., 1893, 
from the German), p. 25. 

25 Schumpeter, J, Wesen und Hauptinhalt, p. 273. 

2« Fetter, F. A. Economic Principles, vol. 1, p. 66. 

" Carver, Th. N. Distribution of Wealth, p. 25. 

28 Seager, H. R. Principles of Economics, 1913, p. 119. Also : Ely, 
R. T., and collaborators, Outlines of Economics, 1917, p. 156. 



302 THE DEVELOPMENT OF ECONOMICS 

well as the use of such words as "determine" and "fixed 
by," is here seen to be side-stepped in the desire to es- 
tablish an equation rather than a law expressive of im- 
mutable sequences. What was aimed at in discussions 
was the comparison of wants or marginal utilities, whose 
equivalence with purchase prices was, at the outset, taken 
for granted. The competitive principle alone needed 
emphasis if anything definite were to be settled. Mo- 
nopoly was felt to be exceptional, always potentially on 
the wane, and furthermore no exception to the hedonistic 
criterion, though when operative it fixed price "always 
at the point of maximum monopoly revenue" ^^ rather 
than at a point favoring the largest number of sales. 
And as for the complicated case of a good serving many 
uses, embodied in different classes of goods, it followed 
from the leading theorem that the least valuable use fixed 
the value of all units for all uses. Marginal utility here 
referred to different uses of one and the same homo- 
geneous stock, and "no unit of the entire stock can be 
valued at a higher return" ^^ than that represented by 
the least valued use. 

So much for the demand or valuation side of price 
analysis. If now one asked what became of costs, the 
reply was as stated a while ago: Costs are valuations or 
marginal utilities of the past viewed by the entrepreneur 
as monetary outlays for concrete things or for services. 
All costs were necessarily values. Only the business-man 
thought of things and expenses ; the economist took a 
larger view, seeing the interdependence between all valua- 
tions that entered into a productive process. There 
was no separate cost, no opposition between it and mar- 
ginal utility. "The opposition between costs and utility 

29 Seligman, E. R. A. Principles of Economics, 1910, p. 256 ; and 
Wieser, F. von. Natural Value (Malloch's translation), Book 5, ch. 4. 
" Wieser, Natural Value, p. 99. 



MARGINISM 303 

IS only that between the utility of the individual case, and 
utility on the whole," ^^ the chief explanation of this 
statement being the operation of marginal utility over the 
"entire field of cognate production." ^^ "The price of a 
good is equal to its marginal utility as well as to the 
expense of the last particle sold." ^^ If a difference 
existed between expense and price the time-element with 
its multitudinous aberrations, objective and subjective, 
must be held responsible. It was not likely that an esti- 
mate of any one person should last forever, or that esti- 
mates of different people for goods undergoing many 
stages of production should tally from beginning to end 
with the sums spent by producers. An average had to 
be imagined. A representative firm of producers might 
meet the changes so as to balance values and costs, but 
in an age of disequilibrium such as the present "the equi- 
librium of normal demand and supply does not thus cor- 
respond to any distinct relation of a certain aggregate 
of pleasures got from the consumption of the commodity 
and an aggregate of efforts and sacrifices involved in pro- 
ducing them. . . ." ^^ In the long run, or else in a per- 
fectly stationary society, costs and marginal bids will 
make an equation; not otherwise. 

Costs, be they of original production or of reproduc- 
tion, were values whether viewed as things or as feelings 
of disutility. In one sense expenses of production con- 
sisted of "the exertions of all the different kinds of labor 
that are directly or indirectly involved in making it, 
together with the abstinences or rather the waitings 
required for saving the capital used in making it . . . ;" ^^ 

»i Ibidem, p. 183. 
" Ibidem. 

" Auspitz, R., und Lieben, R. Untersuchungen ueber die Theorie des 
Preises, p. x. 

'* Marshall, A. Principles of Economics, p. 458. 
" Ibidem, p. 399. 



304 THE DEVELOPMENT OF ECONOMICS 

in another sense "the cost of a commodity is any pain 
that must be submitted to in order to obtain it." ^^ Pain, 
physical or mental, opportunity cost or forfeit of alter- 
native gains, impatience and an excess of producer-pain 
over consumer-pleasure — all these were ideas built at 
various times into the cost account from the subjective 
viewpoint. 

However, try as they might, Marginists could not get 
away entirely from objective costs any more than the 
Utilitarians. Things and their quantities had to be 
noticed and reckoned with. Costs of the old sort there- 
fore did figure in the Marginal analysis, except that 
they were made to act upon supply first, and thus upon 
demand or valuations. It was shown that laws of fatigue 
and the instinct for equalizing pain and pleasure, wholly 
apart from laws of return by weight and tale, determined 
supply, which itself related to want intensities. And so 
cost and demand early appeared as complementaries in 
pricing. Marshall was concerned particularly with this 
aspect, but Jevons before him had summed up the mat- 
ter in the words : "The quantities of commodity given or 
received in exchange are directly proportional to the 
degrees of productiveness of labor applied to their pro- 
duction, and inversely proportional to the values and 
prices of their final degrees of utility." ^'^ A minor ques- 
tion only would be, how differential costs affected price, 
and here the answer according to a later American 
writer was: . . . "the supply of a particular product 
in any market is at last limited by cost to marginal pro- 
ducers or of marginal portions of supply," ^^ a view 
shared by others before and since. 

»« Pantaleoni, M. Pure Economics, 1898, p. 101. 
"Theory of Political Economy, edit, of 1879, p. 209. 
3* Fetter, F. A. Economic Principles, vol. 1, p. 370. See also Wieser, 
Natural Value, Book 5, ch. 5. 



MARGINISM 305 

But this being the case for prices of things, what then 
of incomes? 

Distribution. — Marginism on this subject could not say 
much more than Utilitarianism, since both were static in 
their interpretation of human nature and of social proc- 
esses. Distribution correspondingly proved to be a con- 
test between producers for a maximum share in a fund 
of fixed size. The Ricardians had put a construction 
upon human nature that held out virtually no hopes for 
the great masses. Hence the motion of a "dismal sci- 
ence." Marginists had rejected from the start the Mal- 
thusian doctrine, but they too dealt with concepts sug- 
gestive of a struggle between productive factors, or per- 
haps between proletariat and plutocracy. Feelings and 
marginal valuations took the place of outgo in things 
or in labor, but otherwise little was changed. Further- 
more, though the demand-supply phase of pricing was 
obscured by specific imputations of productiveness, and 
though shares in general were thus displaced by shares 
in a specfic item of wealth in process of production, 
Marginism stuck closely to the price-nature of distribu- 
tion. In fact, this becomes the truer the more exclusively 
we think of the American or Austrian as against Grerman, 
French, or English Marginists. Marginal distribution 
received most careful attention among the former, not 
among the latter. 

Menger and Wieser laid the foundations by their impu- 
tation of values to constituents in a compound good. 
They raised the question: What is any one part worth 
out of several making a whole finished article? And they 
answered : Find out by subtracting the part under investi- 
gation from the rest (Menger), or add it after having 
ascertained the value of the other parts going into the 
article (Wieser). A distinction had of course to be made 



306 THE DEVELOPMENT OF ECONOMICS 

between reproducible and non-reproducible items, which 
might have been extended by comparing different degrees 
of reproducibility. Indeed, in a dynamic treatment this 
imputation to least and most growing parts gained sig- 
nificance when applied to "factors'^ of production such 
as capital, labor, etc. However, the main problem was 
the attribution of values to parts or agents at any given 
instant of time. 

Imputation then could move along several lines. One 
could, for instance, take the whole national dividend and 
assign shares to its joint producers. Or one could take 
any one article and find the shares. Or one could con- 
sider the whole output of a given plant and find out how 
much each factor contributed, respectively claimed. Or 
one could try to determine the share of each unit of a 
single class of factors, such as labor, comparing the 
efficiency of each unit as per sequence or coexistence of 
their several employments. Thuenen had hit upon the 
marginal productivity idea a half century before Menger 
or Wieser resumed his labors. It was at any rate a 
fascinating task from the logical standpoint ! 

As to wages, one either granted many rates in dif- 
ferent regions, or premised a uniform valuation along 
with the mobility of labor and capital. As a rule the 
appeal was to a specified field or production unit. All 
workers of a kind were interchangeable, so that "the 
work that is left undone in consequence of one man^s 
departure is always of the marginal kind." ^^ Under 
those conditions the marginal man set the wage for all 
others, no matter how much these latter might be assumed 
to produce according to the law of diminishing returns. 
Progress being assumed, the supra-marginal worker led 
the rest ; but in statics the course of events ran the other 

3" Clark, J. B. Distribution of Wealth, p. 103. 



MARGINISM 307 

way. Regardless of margins, "the wages of a working- 
man are ultimately coincident with what he produces, 
after deduction of rent, taxes, and the interest of capi- 
tal," ^^ but from the marginal standpoint — to give 
Wieser's view — "the ordinary principles of imputation 
decide what share of the return may be ascribed to each 
individual service; and the value of this share obtains 
directly as the value of the service which produces it. 
Thus every kind and quality of labor shows a different 
result according to the available supply, demand, the 
support received from complementary goods, and the 
technical possibilities." ^^ 

In other words, wage-rates varied with circumstances 
in general, and with ratios of factors employed in par- 
ticular. The manager had much to do with the marginal 
productivity, as much as the marginal man had to say 
about the productiveness of the supra-marginal laborers. 
Besides, though it was argued that "the sum of all the 
productive contributions exactly exhausts the value of 
the total return," ^^ this was open to debate. It could 
stand only if one added : "The imputation of the produc- 
tive contribution assigns to every production good (re- 
spectively factor) a medium share." ^^ Whether medium 
relative to fluctuations in time, or to impracticable indi- 
vidual imputations for factors producing jointly an ar- 
ticle, was not even then decided. The only certain fact 
was the force of demand-supply in fixing marginal values 
and productivities, a corollary of which was : "Should any 
one factor of production — be it land, capital, or labor — 
come more freely into our disposal, the natural rules of 
imputation require that all the others obtain a higher 

*o Jevons, W. S. Theory of Political Economy, edit, of 1879, p. 292. 
*i Wieser, F. von, Natural Value, Book IV, ch. 10. 
« Ibidem, p. 88. 
« Ibidem, p. 93. 



308 THE DEVELOPMENT OF ECONOMICS 

valuation; as they also require that all the factors be 
more highly valued if there should be an all-round in- 
crease of personal want [of goods]. '^ ^* 

On such grounds Marginists found opportunity not 
merely to reduce incomes to prices, or to determine wages, 
but also to imply a sort of ethical justice in the appor- 
tionment of wealth. Wieser like Gossen and Thuenen 
before him, shared the opinions of Jevons in this respect ; 
and later writers like Clark, J. B., and Wicksteed in 
England strengthened the argument. Labor got what 
was coming to it. To each man according to his prod- 
uct! This old slogan of utopianists and socialists of 
diverse shades was now transformed into reality by a 
mode of reckoning unknown to either Smith or Mill. 
The first sentence of the Preface in Clark's "Distribu- 
tion of Wealth" announced: "It is the purpose of this 
work to show that the distribution of the income of 
society is controlled by a natural law, and that this law, 
if it worked without friction, would give to every agent 
of production the amount of wealth which that agent 
creates." And in Wicksteed's "Common Sense of Po- 
litical Economy," 1910, we read: "The central thesis of 
this book is that, so far as the economic forces work 
without friction, they secure to every one the equivalent 
of his industrial significance at the point of the industrial 
organism at which he is placed." ^^ Alas, that we were 
not reminded in the same breath of the definition of utility 
and production, or of the premises psychological, logical, 
and legal, on which the analysis rested ! 

However, the Marginal approach involved also a recan- 
tation of Ricardian rents, and that proved to satisfy 
more standards than those of the marginal laborer. It 

"Ibidem, Book III, ch. 10. 

<" Page 698. See also "Wieser, F. von, Ursprung und Hauptgesetze dea 
Wirtschaftlichen Werthes, p. 177, 



MARGINISM 309 

was shown by Marglnists from Wieser to Schumpeter 
that Ricardo's exclusion of rent from price was illogical 
unless apphed also to the other three shares, and that in 
any case it led to absurdities. Differential products were 
granted to exist. The reality of diminishing returns of 
things was likewise acknowledged. But in the first place 
the law of proportionality did away with specific physical 
productivities, replacing them by values, and in the second 
place rentals became attributes of each and all living 
producers, so that land, besides figuring as a special kind 
of capital, lost its distinctiveness. "The rents of all the 
agents of production constitute, when society is in a 
natural static condition, the entire supply of goods; and 
the supply that is furnished by any one of them — or in 
other words the concrete rent of it — is of course one of 
the value-determining elements." ^^ Rent ceased to be 
the indication of nature's stinginess. Instead we are 
informed: "The origin and the existence of rent is de- 
pendent on the operation of the law of proportionality" ^'^ 
— ^which governs all acts of production. Rent was a part 
of the price of goods because of the diversity of uses to 
which land might be put, and because of the possible loss 
of better alternate returns either in fruits of the earth 
or in hire-money.^^ Rent too was fixed by margins ; only 
they were of two kinds, referring now to static, now to 
dynamic views of economy. 

Confusion on this point was not necessary, and indeed 
differential measurements were coupled with opportunity 
losses, in that lands always bore some rent, — but ab- 
straction of the Marginal sort here as in the case of in- 
terest led far away from Utilitarian ideas. Some Mar- 

« Clark, J. B. Distribution of Wealth, p. 356. 
« Fetter, F. A, Economic Principles, vol. 1, p. 163. 
" See for instance Wieser, Natural Value, Book 5, ch. 12, and Schum- 
peter, J., Wesen und Hauptinhalt, p. 380. 



310 THE DEVELOPMENT OF ECONOMICS 

ginists, for instance, excluded interest from their analysis 
on the ground that it was not a static phenomenon at 
all, a notion that had long been applied to profits in so 
far as they were not assimilable to wages of management. 
On the other hand, where interest was made part of the 
distribution opinion was divided on the relative import- 
ance of productivity and of impatience, i. e., the pref- 
erence of present over future goods. In both cases a 
uniform rate of interest was thought of, and the loan- 
fund somehow implied to be identical with, or to stand 
in a definite ratio to, the existent fund of capital goods; 
but in emphasis discussions varied considerably. 

Jevons, himself, had argued for a productivity theory 
of interest without going into the refinements of later 
writers. He believed that "the interest of capital is 
the rate of increase of the produce divided by the whole 
produce." ^^ This would be so even "apart from the 
question of time," ^^ since the "rate of interest depends 
on the advantage of the last increment of capital. . . ." ^^ 
Wieser supported this contention in his ^'Natural 
Value" ^^ with much ardor ; but in opposition to him his 
compatriot Boehm-Bawerk wrote: "So long as the wants 
of spiritual beings call for fuller and finer satisfactions, 
and so long as the working life rises to higher levels, so 
long will there be a premium put on the present wealth 
which makes more ample wealth possible." ^^ *'It is 
because the stock of present goods is always too low 
that the conjuncture for their exchange against future 
goods is always favorable." ^^ Or to bring out another 
aspect: "Interest will be high in proportion as the na- 

" Theory of Political Economy, 1879, ch. 7. 

"9 Ibidem, p. 248. 

" Ibidem, p. 255. 

w Books III and IV. „ ^ ^ , 

»» Positive Theory of Capital, transl. by Smart, W., p. xvi. 

" Page 359. 



MARGINISM 311 

tional subsistence fund Is low, as the number of laborers 
employed by the same is great, and as the surplus returns 
connected with any further extension of the production 
period continue high, and vice versa." ^^ 

Impatience thus was selected by Boehm-Bawerk and by 
many later Marginists as the decisive element in the 
situation. The technical superiority of capitalistic 
methods was not overlooked, but in the endeavor to distin- 
guish between things and values, and under the influence 
of psychological premises, the personal equation seemed 
the most attractive. In the words of an American writer : 
"In the general causation of distribution . . . the central 
role is played by the individual rate of preference for 
present over future income which ... is the subjective 
prototype of the rate of interest. The study of the theory 
of interest therefore lays the foundation for a study of 
the theory of distribution";^^ and the interest-rate itself 
is the "excess above unity of the rate of exchange between 
the values of future and present goods taken in relation 
to the time interval between the two sets of goods." ^"^ 

Tt^^o observations however may, by way of conclusion, 
be oifered on this emphasis of the want-side of values. 
Namely, in the first place, the productivity-theory of in- 
terest could explain a supposed uniformity of rates while 
the agio-theory could not, or at any rate not so directly. 
For the productivity standard in general left this clean- 
cut analysis of distribution: It premised the mobility 
respectively interconvertibility of labor and capital, and 
therefore fixed wages and interest at the margin. Neither 
laborer nor lender could get more than the contribution 
made by least effective uses, since any other unit of their 
kind of help was equally available with their own. Only 

55 Page 401. 

"« Fit^her, I. The Rate of Interest, 1907, p. 234. 

57 Ibidem, p. 340. 



312 THE DEVELOPMENT OF ECONOMICS 

the landlord could keep the supra-marginal product 
permanently, though enterprisers might for a while, until 
competition had leveled their temporary differential prof- 
its to that of the average producer. Capital and labor 
hence left a consumer's surplus, except that part of 
capital's supra-marginal product would be absorbed by 
the enterpriser. Rent was a strain on consumer's sur- 
plus and profits also when rising far in excess of wages- 
of-management.^^ 

In the second place, the agio-theory left open the ques- 
tion as to what determined preference-rates ; and though 
this might be dismissed as something not within the scope 
of Marginal economics, as a matter of fact opinions 
differed. Impatience as an attitude of mind of sociologi- 
cal origins was plainly as much a factor for economic 
inquiry as many other topics embodied in economic 
treatises. So one is reminded here, as Table Four will 
serve to illustrate, of the very general disregard of the 
exact bounds set to economics by the logicians.^^ We 
find that some subjects of interest to economics were 
debarred, while others equally irrelevant from a logical 
standpoint were admitted, not so much to complete a 
scientific survey, as to satisfy a vague notion that eco- 
nomics should become practical even when theory had 
nothing to say. Both Utilitarian and Marginal treatises 
thus contained much material not adaptable to the kind 
of schematization prescribed by methodology or premises. 
Current problems of interest to the thinking man every- 
where were put under the rubric "Applied Economics," 
with the implication that the preceding analysis had 

"' For a lucid statement of the productivity view of interest and of its 
bearing on Distribution see Taussig, F. W., Principles of Economics, 1911, 
vol. II, Book 5. Contrast this with Davenport's critique in his Economics 
of Enterprise, chg. 18-20. 

^° Philippovich, E. von, in his Grundriss der Politischen Okonomie, 9. 
edit., devotes to discussions of theory somewhat over 25 per cent, of his 
three-volume work. 



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314 THE DEVELOPMENT OF ECONOMICS 

something definite to offer for their solution. Whether 
this was actually so or not, was not usually important, 
for on all sides the abstruse character of theory was 
felt to be a weakness. It was agreed that applications 
should be made, or perhaps that economics as a science 
could not take care of all things economic. In either 
case Marginists were bound to reach out beyond the 
limits of their Logic. 



CHAPTER NINE 
CONCLUSION 

If we ask now, at the end of our historical sketch, what 
were the outstanding features in the growth of economics 
as a science, the answer will of course vary according to 
the selection of materials, and our personal bias. As 
stated at the beginning of this survey, historical interpre- 
tations cannot be taken to read the same way for all 
people, regardless of times. The genetic viewpoint is 
useful not because it gives truths immutable with respect 
to the data considered, even though they lie in the distant 
past, but because for the time and purpose necessarily 
guiding our valuations it serves to connect past and 
future, and more especially also to disclose lines of 
change — or if we prefer, of development — that otherwise 
would probably have escaped our notice. 

A definitive judgment therefore can never be passed 
upon things either now occurring or already of the past. 
But on the other hand distance does give perspective, and 
so provides a setting for particulars that must satisfy 
far more than the impression gained close at hand. In 
this respect history is like a picture which we wish to 
study. If we step up too close it loses meaning, and 
perhaps becomes a mere blotch of pigments. We see 
nothing of the painter's idea and art. The canvas will 
look like the palette itself on which mixtures and shades 
of color have been tried out in grotesque variegation. 
But if we move away a bit our impression is changed. 

315 



316 THE DEVELOPMENT OF ECONOMICS 

By degrees, as we continue stepping back, the splotches 
assume position and purpose. Objects are definitely 
recognized. Foreground and background are separated 
to make room for details which combine to present an at- 
tractive whole. We read into the picture certain mean- 
ings, guided by the usual experiences of our sense and 
mind. Perspective is gained, we say; that is, apprecia- 
tions are possible now because on the plane before us 
things appear in the relations in which we find them in 
the outside world. Truth and fidelity, accuracy and 
beauty thus are revealed. We sense as correct and sig- 
nificant what at too close range seemed nonsensical. 

So it is with the events of the past. If we stand too 
near to them they cannot mean much to us, or at any 
rate they will not convey the ideas gathered by standing 
farther away. Contemporary happenings for this reason 
are personalized, as though each could do as he pleased, 
or as though each was directly moved by another's com- 
mands. The will-aspect of life is uppermost in our minds. 
We speak of motives and policies and the power of office 
and of individuals. We enter into the game as if it were 
of a moment's planning, a mere show that could stop when 
we demanded, and whose antecedents are of but a moment's 
plotting. We simplify social processes by taking a 
snap-shot picture of them, just as a photograph tells us 
something of a man's appearance, but not all, nor how 
the features came to be what they are, nor in what way 
they might consequently be expected to change later. 
Excessive proximity obstructs our view as truly as blind- 
ness shuts us off from it altogether! 

As regards the history of economics, however, we are 
now sufficiently removed from a great deal of it to be en- 
titled to some sort of opinion, even if later estimates will 
have possibly a still greater value. What the founders 



CONCLUSION 317 

of economics had in mind was evidently, in the first place, 
an extension of law from the realm of physics to that of 
psychics. This is a fundamental that can never be over- 
emphasized. It was the fondest wish of the Naturalists 
to test out the propositions advanced by physics and 
astronomy, to find out whether human nature was rad- 
ically different from the physical world, or whether a 
rationale of meliorism could be discovered that might 
mean to legislators what applied natural science and 
mathematics had even then come to mean for producers 
of wealth. 

The astonishing growth of natural science after the 
Renaissance exercised an abiding influence upon specu- 
lators in England and on the continent. It was felt 
that a great question had really been raised, the answer 
to which must sooner or later he essayed. In the wake 
of the discoveries made by men like Kepler, Galileo, Har- 
vey, Newton and so on, followed logically a group of 
thinkers who endeavored two principal things, first, to 
unify the new knowledge accumulated by science so as 
to restate the problems of antiquity, and secondly to 
span the gulf between physics and psychics. It was 
asked, what is the difference between the two that makes 
their linkage impossible? It was asked, why must we 
assume one set of laws for the outside world, and an- 
other for the inner without contradicting not merely 
Gospel and dogma, but also our reasoning in each of the 
two fields ? And the reply was : The difference is not 
as great as it seems to be. A monistic conception is the 
best, all things considered. Eventually the whole realm 
of reality and of knowledge will have to be bounded by 
a single law, though to metaphysicians spirit and matter 
might mean two categorically different spheres, each 



318 THE DEVELOPMENT OF ECONOMICS 

a particular kind of truth, and the former ultimately 
the basis for all else. 

Social science thus arose as the result of an outlook 
that has fought with the dualistic and transcendental for 
supremacy ever since. It is best understood as a pro- 
test against an older theology and metaphysics. Por 
all questions of human thought, feeling, and behavior 
had been for centuries resolved into definitions of dogma, 
ethics and politics receiving their stamp from this pos- 
tulate. But after the Reformation theology was re^ 
stricted to a smaller sphere of jurisdiction, and as for 
the professional philosopher, he was not able in the long 
run to assert his authority, not even such masters as 
Descartes, Leibniz, Spinoza, Kant and their disciples. 
So it came about that psychology developed fastest in 
the home of empiricism, where moralists and students of 
social relations sought the solution of their problems in 
an intimate, first-hand study of human nature. The 
larger aspects of their work were forgotten or deliber- 
ately laid aside in the hope of an answer to the less ah- 
struse question whether the methods of natural science 
could render valuable aid, whether laws might be estab- 
lished such as could compare favorably with the New- 
tonian. 

And the verdict, as stated, was in the affirmative. It 
could scarcely be otherwise. Stoic speculations and the 
example of natural science led men to expect notable re- 
sults from their search. The Newtonian world was 
widely believed to have a counterpart in the realm of 
psychic phenomena. Mechanism and motion were to in- 
here in all things, to govern things and thoughts alike. 
Forces everywhere ; disequilibrium alternating with equi- 
librium. This was at the basis of eighteenth century 
thinking; in terms expressive of this viewpoint the best 



CONCLUSION 319 

works were written. Hume, for instance, applying* the 
experimental method to psychology; others believing in 
a material origin of immaterial facts ; Comte expounding 
a social physics that should be for the moral inquiries 
what Newton was to the physical; while Quesnay had 
pictured wealth in circulation, just as blood coursed in 
the human body. Not mere metaphors these, but anal- 
ogies held to be real I 

If Physiocratism failed we must attribute it partly 
to a dryness of presentation suitable only for erudites, but 
partly also to a rapidly changing economic order that 
had little in common with the life of the Physiocrats 
themselves. Thus, for several reasons the lead of the 
French passed over to England where accumulations of 
literature as well as the outward circumstances provided 
a fertile field for economists. Constitutional liberties, 
personal safety, the downfall of the guild system, and 
exceedingly advanced ideas on economic organization, — 
here we have factors that could not but encourage men 
of ability. Smith had a comparatively easy road because 
the individualistic system first espoused by Frenchmen 
was nicely attuned to the opportunities of a people on 
the eve of a great industrial revolution. Business-men 
could not but take kindly to a doctrine which bade them 
go full-steam ahead, with the intimation that the race 
ought to belong to the swift. 

Nonetheless there was, as we have seen, the idea of 
law regulating individual actions as it governed the in- 
teractions of matter. The principles of physics that 
Hobbes, Locke, and Hume had discovered first in the 
workings of individual consciousness, were gradually 
transferred to the social field. With the Physiocrats the 
emphasis, to be sure, had been on the physical side of 
the human constitution, but Smith and later writers 



320 THE DEVELOPMENT OF ECONOMICS 

paid attention increasingly to the psychological aspects. 
It was psychology that Smith and the Utilitarians first 
read into economic happenings. It was with the under- 
standing that human nature was in its essentials known, 
that it was substantially fixed and uniform, that the 
instincts were few and all-powerful, though exploited by 
reason as man grew up, — it was this conception that 
gave to economics a basis for exact measurements, for 
nicety of delimitation of duties assigned, for definitions 
and laws that — it was held^could stand worthily along- 
side of the inductions of natural science. 

In Adam Smith's writings economics was still under the 
tutelage of Christian dogma. Providence played a con- 
spicuous part, and ethics was in reality as strongly Bib- 
lical as it pretended to be secular. Hence sympathy won 
over egoism. Hence Laissez Faire was a conclusion from 
facts, not a prejudgment as later it seemed to be. How- 
ever, in Utilitarianism the a-moral and agnostic concept 
carried the day. Psychology supplanted what had been 
left of theology. Sensationalism was everything, literally. 
Ideas now counted, not things. If the Physiocrats had 
dwelled long on goods in the concrete, the Ricardian fol- 
lowers now pointed again and again to values. And 
values related to facts of consciousness. It was in a way 
curious that with all this revolving about sensations the 
Benthamites did not abandon at once their objective 
norms of value-measui-ement. However, they did not. 
They stuck to tangible things no less than to psychics, 
until a later group of economists showed the inconsistency 
of such procedure. 

For the time being then the sensational psychology 
reigned omnipotently. Ethics and economics were mar- 
vellously schematized. Sensations, ideas, feelings, asso- 
ciations of inner reactions, and composition of thoughts 



CONCLUSION 321 

and emotions — such were the crucial facts as the 
pioneers of economics saw them. To know how a social 
science could exist one had only to demonstrate the in- 
teraction between individual minds according to the laws 
just mentioned. The physical environment was for each 
and all the same; the result of dual interactions meas- 
urable in precisely the same manner that one might ac- 
count for chains of ideas in any one person. John 
Stuart Mill was not alone in proclaiming this principle; 
only, he was most explicit and logical in delineating 
the scheme whereby economics could be divorced from 
sociology. Hence the concept of an "economic man." 

It was, from this standpoint, also a notable gain that 
the logical problem should be given an entirely new as- 
pect; that medieval deduction should be replaced by de- 
ductive natural science, or on the other side by induction 
as it had long been urged by prophets in the field. Eco- 
nomics therefore served as a proving ground for a new 
weapon that natural scientists could not furnish. It 
was argued that, given certain laws of mind and emo- 
tion, economics was bound to go about its work just as 
mathematics did, though a verification might and should 
be attempted whenever the nature of the problem allowed. 
The calculation of values necessitated such a stand, and 
in the hope of being exact the predominance of economic 
motives was predicated as a basis for detaching a general 
social and ethical science from that of Adam Smith. 
Averages consequently played no part in UtiHtarian eco- 
nomics, though a dynamic view like that of Historism 
could logically resort to it for important conclusions. 
And what is more, for similar reasons economics at no 
time relied excessively upon either statistics or experi- 
mentation ; for the one was unnecessary if eighteenth 
century psychology was correct, and the other was con- 



322 THE DEVELOPMENT OF ECONOMICS 

ceded to be impracticable except on minor occasions. So 
economics continued to be a deductive discipline with 
claims to precision born ultimately of sensationalism, but 
attributed immediately to abstractions which could be 
rectified in the light of particulars when it was so desired. 
What else could happen under those circumstances? 
Plainly economics was playing with concepts, as well as 
studying the concrete. 

Furthermore, the breach between the original and the 
later Utilitarian and Marginal economics was widened by 
a shifting of emphasis that was truly startling. Smith 
had dealt with prosperity, production, stuffs in circula- 
tion, surplus of stuffs and their ratios ; but afterwards 
we hear much of pleasure, price, values distributed as 
rights to goods, and of capital as a fund. Rights rather 
than ratios are involved. To the hedonistic premises 
are added legal presuppositions without which economics 
has no existence. Freedom of contract and competition 
thus became essentials in the scheme, even if perhaps 
historically of a particular time and place. The whole 
valuation and pricing process is built on differentials of 
purchasing-power, opportunity, and personal aptitude. 
The strong set up standards of productiveness for the 
weak. *ro produce is to render services whose value is 
individualized as never before. 

Utilitarian economics attacked the price problem by 
comparing time and labor units. At the outset it was 
hoped that time might be an equivalent for productive- 
ness ; but later on labor itself was referred to products, 
so that socialism stood alone in its objective explana- 
tion of wealth. The idea of measuring expenditure of 
energies never found many friends. Hence, when the 
time-element too was discarded, prices ceased to be ac- 
counted for on non-competitive principles. What re- 



CONCLUSION 323 

mained was a summation of expenses according to entre- 
preneur norms, and this indeed turned out to be the usual 
method of computation. Differential productivity of 
stuffs had a place only in agriculture or industry be- 
cause production was separated from value and distri- 
bution. 

Marginism was therefore consistent in denying from 
the start the possibility of explaining prices as had 
been understood once upon a time. The conclusion 
reached by the second quarter of the century, viz., that 
price analysis involves equations rather than specific 
causation found favor also with the founders of Mar- 
ginism. Only, they put differential want and rates of 
preferences in place of differential objective productiv- 
ity. The equation which now served to determine ratios 
of exchange for either goods or services dealt not with 
time or energy or stuffs, but with pain and pleasure, with 
feelings and wishes and utilities. Eighteenth century 
psychology again proved fundamental in that it pro- 
vided the standards by which purchases were to become 
rational. For sensations are supposedly back of ideas, 
and ideas back of feelings ; and feelings are made synony- 
mous with emotions ; and memory and association step in 
to arouse and re-arouse former ideas and feelings ; and 
anticipations of pleasure have the effect of realization 
itself; and intensities of feeling or ideas are measured by 
last increments which indeed are the most characteristic 
feature of Marginism. Thus want and value not only 
were proportionate to sense impression and feelings, but 
in addition they unfailingly resulted in deeds of ex- 
change, so that price became the last link in a long 
chain of psychological facts skillfully maneuvered for a 
definite purpose. There was nothing else to be done in 
the matter, unless people gave up the connection between 



324 THE DEVELOPMENT OF ECONOMICS 

psychics and prices altogether, in which case, as some 
grudgingly admitted, a vicious circle was avoided at the 
cost of the analysis itself. What then was left was a 
balancing of pecuniary valuations in the open market, 
the net result being once more equations of prices, but 
traced to differential purchasing-powers rather than to 
differential want intensities. Hence Marginism would 
have renounced its original intents. 

The Historical movement was preeminently a protest 
against the Utilitarian interpretation of Adam Smith, 
but as events showed, there was good reason why it should 
also disagree with the Marginists who were the logical 
successors of Utilitarianism. So, while Historism was 
but an episode in the larger performance, and withal a 
piece of extravaganza that many thought not worth while, 
it had nevertheless a mission to fulfill. It made econo- 
mists think by bringing out contrasts that might other- 
wise have been overlooked. It took exception to one 
philosophy, and propounded another. It put on the debit 
side: The individual, statics, instincts, earnings, the en- 
trepreneur, and a time-honored absolutistic ethics; while 
at the right side of the line it put: Social norms of wel- 
fare, dynamics, a stress of learning and self-control, 
ideals of consumption, state interference, and withal a 
new sort of morality that is pagan rather than Christian 
in the accepted sense. 

That is, the friends of Historism had done away with 
rampant individualism as espoused by the founders of 
economics. They saw no good in the static abstractions 
that detached economic activities from social processes 
as a whole. To them these latter constituted a single 
irreducible unit. To them hedonism was an inadequate 
way of appraising human nature and social history, be- 
cause it exaggerated egoism and underestimated the force 



CONCLUSION 325 

of post-natal experiences. It was granted that congen- 
ital traits must count. But it was also pointed out that 
the inherent good in man needed only a right stimulus 
to suppress proclivities for sordid pleasure. Hence, what 
Smith had deemed a task in part fulfilled by Providence, 
and for the rest a natural expression in an age-long evo- 
lution of mankind, the Historians hoped to accomplish 
by a direct and systematic control of individual actions. 
Social heredity, since it surrounded man from birth to 
death, was to lead him under proper surveillance into 
right channels of thought and conduct. 

Accordingly individual and social interests were not 
considered as necessarily indentical at all vital points. 
What a man desired might be good enough, but what 
he achieved might do harm. Furthermore, what a man 
earned could not matter as much as what he produced, 
and how he produced it. An uncompromising business 
viewpoint was avoided as possibly damaging to public 
welfare. What was needed, we are told again and 
again, is a socializing of religion, a substitution of prac- 
ticable aims here on earth for fancies nowhere realizable. 
Hence it is not surprising perhaps that German econo- 
mists, even when not strictly of the Historical School, 
had great faith in state regulations and purposely wid- 
ened the field of economics in one sense while narrowing 
it elsewhere; including programs and aspects looked 
askance at by orthodox writers, but emphasizing a na- 
tionalistic end whose pragmatic tests endangered one of 
the most fundamental rules of pure science. 

However, it must also be admitted that traditional 
orthodox economics has recently been criticized from 
within. Not only outsiders have passed slighting re- 
marks, but increasingly economists of the profession, even 
when in the main Utilitarian or Marginal, have taken 



326 THE DEVELOPMENT OF ECONOMICS 

occasion to demur to points of doctrine. A ferment has 
been noticeable in the last few decades which bodes ill for 
the old-time system. New ideas have been broached, and 
new ends are diligently sought. 

Thus, for one thing, our concept of human nature has 
materially changed. Its simplicity from either the psy- 
chological or biological standpoint is being questioned, 
and the difficulty of untangling its numerous factors 
reluctantly conceded. We know more now of laws of 
heredity and variation, but have at the same time found 
the question of instincts and the passions to be as vex- 
ing as ever. Investigators have come to stress the plas- 
ticity of innate traits and predispositions, and to rely 
more upon education in many phases. 

How men value things, and how price takes the place 
of personal wants, this problem has gained renewed inter- 
est. The force of legal institutions is no longer disre- 
garded in analyzing demand. And what is more impor- 
tant, the central theme has gradually been impugned as 
being an error of judgment. Some would minimize Price 
and Distribution and pass over to a more careful consid- 
eration of Consumption and Control. 

But however that may be, it will further be agreed that 
the logic and methodology of social science is itself under- 
going a revision of no trifling sort. What is reasoning 
and what the relation between induction and deduction, 
what really should be meant by causation and how our 
answer bears on a selection of fields for inquiry, to what 
extent measurements may be undertaken and whither laws 
so arrived at may lead to in their practical uses, how 
static concepts and statistical methods may together fur- 
nish an instrument of discoveries — all these queries are 
tending to reappear in new guise and with a new meaning. 

The old mechanistic psychology is passing away. Some 



CONCLUSION 32T 

would remark that it has long passed away. What mind 
is and how human will labors to produce history is a 
topic for examination with appliances not formerly 
known. Consequently, too, our view of what morality 
is and of what ethics depends on for its conclusions is 
being altered by degrees. Eventually, no doubt, new 
norms of prosperity will be contrasted with the ancient 
absolutistic ones. To government will be assigned more 
onerous duties than have been given to it formerly. A 
changed economic environment is bidding students to pre- 
pare for recantations and research. Marginism, there- 
fore, cannot be held to reign unchallenged, much less 
to have brought the development of economics to a close. 
Heretofore economics belonged essentially to Europe. 
It was in France that the science had its inception, and 
in England that it reached its highest development along 
lines suggested by the author of "The Wealth of Na- 
tions." Throughout the entire course of its growth eco- 
nomics must be granted to have found eminent leaders 
on British soil. There method and principles were stud- 
ied most carefully, and in an original manner; there the 
practical aspects engaged thinkers and legislators more 
seriously than perhaps anywhere else. The historical 
standpoint was treated best by the Germans, although 
other nations had contributed something in earlier days. 
The Austrians in the next place, gained prestige by their 
clear and complete exposition of the marginal principle, 
a rather odd fact considering the Anglo-Saxon origin 
of the psychological doctrines at the root of it. And 
lastly, the United States laid Europe under obligation 
for ideas essential to both static and dynamic economics, 
the last half century having in this respect fulfilled prom- 
ises made many generations ago by philosophers and 
psychologists unacquainted with a science of economics. 



328 THE DEVELOPMENT OF ECONOMICS 

Whether hereafter the leadership shall remain with a 
few countries — not denying the laudable part played by 
Italy and minor nations of the Old World — no one can 
say. But it seems not unlikely that changed conditions, 
precipitated by the Great War, will stimulate additional 
people to constructive thinking. Civilization is no doubt 
to be less centralized geographically from now on than 
it has been so far. A number of countries have been 
awakened to the western viewpoint whose voice should 
not go unheard in the long run. Much new material, and 
new modes of approach, are to be tried out for partly 
new purposes, wherefore histories of thought, and of eco- 
nomic theories in particular, will very probably gain 
rather than lose in importance. 



A WORKING BIBLIOGRAPHY 



INTRODUCTORY NOTE 

(1) A complete and thorough history of economics as a science, 
that would do justice to all its phases including particularly its 
roots in philosophy and psychology, has not yet been written. It is 
therefore not supposed that the materials here listed will afford an 
exhaustive treatment of the subject, or even cover all aspects in- 
volved. However, they are meant to give a working bibliography for 
a study of many important sources, especially such as are readily 
available in the United States. Further materials will inevitably 
be encountered in the perusal of materials here listed, notably of 
course in scientific periodicals and cyclopedias. 

(2) The non-economic literature bearing on the development of 
economics is so important that it seems expedient to include much 
of it even in an introductory survey. The main line of division (A 
and B in this bibliography) between non-economic and economic 
literature will therefore explain itself. On the other hand, the dis- 
tinction between works on methodology and works on principles of 
economics is made chiefly to call attention to the important role 
that premises have always played in the exposition of economic 
doctrines. 

(3) Books and articles have been selected on the principle of 
giving what is most representative of a school or outlook, or is 
pioneer labor, or was peculiarly influential in the history of eco- 
nomics. Many works of equal intrinsic merit have thus been ignored 
merely because of the restriction in number. 

(4r) It cannot be emphasized too strongly that a careful student 
must rely upon sources rather than upon secondary works on his 
subject. The study of primary materials will give that touch of 
realism and of conviction that no other authority can promise. 
Hence the divisions I and II made below under both A and B. 

(5) For the eighteenth and nineteenth centuries a number of 
doctrinal works have been given, classified by countries, because — 
with very few exceptions — individual treatises are not considered in 
this book. However, the footnotes provide further references of 
value. 

(6) For all source materials the date of ^rst publication is given, 
though in some cases the dates of later editions and of translations 
have been added. Furthermore, excepting American literature, which 
has been considered up to 1910, the bibliography reaches only up 
to 1900. 

Finally, histories of economics best suited to the needs of Ameri- 
can students have been marked with an asterisk; but this does 

329 



330 THE DEVELOPMENT OF ECONOMICS 

not make other accounts by any means negligible. Diligent reading 
of both European and American books will yield fruitful sug- 
gestions in abundance. 

A. NON-ECONOMIC LITERATURE. I— SECONDARY WORKS 

1. Histories of Philosophy 
a. General 

Cushman, H. E. A Beginner's History of Philosophy, 3 vols., edit. 

of 1918-19. 
Marvin, W. T. The History of European Philosophy, 1917. 
Thilly, F. A History of Philosophy, 1914. 

Weber, A. History of Philosophy (transl. by Thilly, F.), 1896. 
Windelband, W. A History of Philosophy (transl. by Tufts, J. H.), 

1901, 2. edit. 

b. Modern Philosophy 

Calkins, Mary W. The Persistent Problems of Philosophy, 4. edit., 

1917. 
Hoifding, H. A Brief History of Modern Philosophy (transl. by 

Sanders, Ch. F.), 1912. 

c. Greek Philosophy 
Gomperz, Th. Griechische Denker (published in English by John 
Murray, London, 1906-12). 

d. Readings in the Sources 
Rand, B. Modern Classical Philosophers, 1908; giving selection of 

writers from G. Bruno to H. Spencer. 
Partridge, G. E. A Reading Book in Modern Philosophy, 1913; 

covering the period from Descartes to H. Spencer. 
Bakewell, Ch. M. Source Book in Ancient Philosophy, 1907; giving 

excerpts for the period of Thales to Plotinus. 

2. Histories of Sciekce, Psychology, Political Theories, 

AND Ethics 

History of Science 
Williams, H. S. A History of Science, 4 vols., 1904. See especially 
vol. II. 

History of Psychology 

Klemm, O. A History of Psychology (transl. by Wilm, E. C), 1914. 
Warren, H. C. A History of the Association Psychology, 1921. 

Political Theories 
Dunning, W. A. A History of Political Theories, 3 vols., 1902, 1905, 

1921. The second and third volumes deal with modem times. 
S'cherger, G. L. The Evolution of Modern Liberty, 1904. 
Coker, F. W. Readings in Political Philosophy, 1914. 

History of Ethics 
Jodl, F. Geschichte der Ethik in der Neueren Philosophie, 2 vols., 
1882-89, 2. edit., 1906-12. 



A WORKING BIBLIOGRAPHY 331 

Lecky, W. E. H. A History of the Rise and Influence of the Spirit 
of Rationalism in Europe, edit, of 1913. 

Albee, E. A History of English Utilitarianism, 1903. 

Stephen, L. The History of English Thought in the Eighteenth Cen- 
tury; 3. edit., 1902. 

A. II— SOURCES 

1. Seventeenth Century 

Philosophy and Psychology 

Descartes, R. Discours de la Methode, 1637, transl. into English by 

Veitch, J., edit, of 1897. 
Hobbes, Th. Elements of Philosophy, 1655 (especially Part I) in 

Molesworth's edition, 1839-45; 16 vols. 
Locke, J. Essay Concerning the Human Understanding, 1690; edited 

by Eraser, A. C, 1894. 

Ethics and Political Theories 

Grotius, H. De Jure Belli et Pacis, 1625. Translated by Whewell, 

W., 1853. 
Hobbes, Th. Leviathan, 1651. 
Rachel, S. On the Law of Nature and Nations, 1676, English version 

by Carnegie Institution of Washington, D. C, 1916, 2. vol. 
Locke, J. Two Treatises on Government, 1690; edited by Morley, H., 

1894. 
Cumberland, R. De Legibus Naturae, 1672. English by Maxwell, J., 

1727. 
Cudworth, R. The True Intellectual System of the Universe, 1678. 
Shaftesbury, Third Earl of. Inquiry Concerning Virtue and Merit, 

1699. 

2. Eighteenth Century 

Philosophy and Psychology 

Hume, D. A Treatise of Human Nature, Book I: Of the Under- 
standing, 1739; edited by Selby-Bigge, L. H., 1896. 

Hartley, D. Observations on Man, His Frame, His Duty, and His 
Expectations, 2 vols., 1749. 

Condillac, E. B. de. Traite des Sensations, 1754. 

Holbach, Baron P. H. D. von. Syst^me de la Nature, 1770. 

Ethics and Political Theories 

Hutcheson, F. Inquiry into the Original of Our Ideas of Beauty and 

Virtue, 1720. 
Hume, D. Of Morals (Book III of His Treatise of Human Nature), 

1740. See also the restatement of the subject in his: An Inquiry 

Concerning the Principles of Morals, 1751. 
Smith, A. Theory of the Moral Sentiments, 1759. 
Ferguson, A. Institutes of Moral Philosophy, 1767. 
Tucker, A. The Light of Nature Pursued, 1788. 
Paley, W. Principles of Moral and Political Philosophy, 1785. 
Godwin, W. Enquiry Concerning Political Justice and Its Influence 
on Morals and Happiness, 1793. 



332 THE DEVELOPMENT OF ECONOMICS 

Montesquieu. Esprit des Lois, 1748; transl. into English by Nugent, 

Th., 1873, 2 vols. 
Morelly, Abbe. Code de la Nature, 1756. 
Rousseau, J, J. Du Contrat Social, 1762. 
Bentham, J. Fragment on Government, 1776. 
Bentham, J. Principles of Morals and Legislation, 1789. 
Selby-Bigge, L. A. British Moralists (Selections from Sources), 

2 vols., 1897. 

History and Statistics 

Vico, J. B. Principii della Scienza Nuova d'Intorno alia Commune 

Natura delle Nazioni, 1725. 
Voltaire, F. M. A. de. Essai sur les Moeurs, 1756. 
Ferguson, A. Essay on the History of Civil Society, 1767. 
Herder, J. G. von. Ideen zur Philosophic der Geschichte der Mensch- 

heit, 1784-91. 
Condorcet, Marquis de. Esquisse d'un Tableau Historique des Pro- 

gres de I'Esprit Humain, 1794. 
Suessmilch, J. P. Die Gottliche Ordnung in den Verhaltnissen des 

Menschlichen Geschlechts aus der Geburt, dem Tode, und der 

Fortpflanzung desselben, 1741. 

History of Statistics 
Meitzen, A. Geschichte, Theorie und Technik der Statistik, 1886, 
transl. by Falkner, R. P., in Annals of the American Academy 
of Political and Social Science, 1891, Vol. I. 

3. Nineteenth Century 

Philosophy 

Hegel, G. W. F. Logik, 1817, in Encyclopadie der Philosophischen 

Wissenschaf ten ; transl. by Wallace, W., second edit., 1892. 
Brown, Th. Lectures on the Philosophy of Mind, 1820. 
Stewart, D. Elements of Philosophy, 1818-26, being the second and 

third volume of his works, 1810-26, 3 vols. 
Herschel, J. F. W. Preliminary Discourse on the Study of Natural 

Philosophy, 1830. 
Whewell, W. Philosophy of the Inductive Sciences, founded upon 

their History, 2 vols., 1840. 
Mill, J. S. A System of Logic, Ratiocinative and Inductive, 1843. 
Mill, J. S. Comte and Positivism, 1865. 

Mill, J. S. Examination of Sir William Hamilton's Philosophy, 1865. 
Jevons, W. S. Principles of Science, 1874. 
Wundt, W. Logik, 3 vols., 1881-84, especially vol. II. 
Dilthey, W. Einleitung in die Geisteswissenschaften, 1883. 
Windelband, W. Geschichte und Naturwissenschaft, 1894. 

Psychology and Ethics 
Bentham, J. A Table of the Springs of Action, 1817. 
Mill, Jas. An Analysis of the Phenomena of the Hirnian Mind, 1829; 

edited by his son John Stuart, and others, 1869. 
Bain, A. Senses and Intellect, 1855. 



A WORKING BIBLIOGRAPHY 333 

Fechner, G. Th. Elemente der Psychophysik, 1859. 

Hegel, G. W. F. Philosophie des Rechts, 1820; transl. by Dyde, S. W., 

1895. 
Whewell, W. Elements of Morality Including Polity, 1845. 
Mill, J. S. Utilitarianism, 1863. 
Bain, A. Mental and Moral Science, 1868. 

Economic Aspects of Civil Law 

Lassalle, F. System der Erworbenen Rechte, 1861. 

Boehm-Bawerk, E. von. Rechte und Verhaltnisse vom Standpunkte 
der Volkswirtschaftlichen Gueterlehre, 1881. 

Jourdan, A. Des Rapports entre le Droit et I'Economie Politique, 
1885. 

Wagner, A. Volkswirtschaft und Recht, 1894, Part II of Wagner's 
Handbuch. 

Ely, R. T. Property and Contract in Their Relation to the Distribu- 
tion of Wealth, 1914, 3 vols. 

Statistics and Sociology 

Gioja, M. Filosofia della Statistica, 18'26, 2 vols. 

Quetelet, L. A. J. Du Systeme Sociale, 1848. 

Quetelet, L. A. J. Sur I'Homme, Physique Sociale, 1835. 

Dufau, F. P. Traite de Statistique, 1840. 

Knies, K. Statistik als Selbstandige Wissenschaft, 1850. 

Wagner, A. Die Gesetzmassigkeit in den Scheinbar Willkiihrlichen 

Menschlichen Handlungen, 1864. 
Block, M. Traite de Statistique, 1886. 

Mayr, G. Die Gesetzmassigkeit im Cesellschaftsleben, 1887. 
Comte, A. Cours de Philosophie Positive, 1830-42. Abridged version 

in English by Martineau, H., 1853. 
Lotze, R. H. Mikrokosmos. Ideen zur Naturgeschichte und Geschichte 

der Menschheit, 3 vols., 1856-64, especially vol. 2. 
Carey, H. C. Principles of Social Science, 3 vols., 1860. 
Bagehot, W. Physics and Politics, 1873. 
Spencer, H. Social Statics, 1850. 

Spencer, H. The Study of Sociology (methodological), 1873. 
Spencer, H. Principles of Sociology, 2 vols., 1876. 
Lilienfeld, P. von. Gedanken liber die Sozialwissenschaft der 

Zukunft, 5 vols., 1873-80. 
Schaeflfle, A. E. F. Bau und Leben des Sozialen Korpers, 4 vols., 

1875-78. 
Ward, L. F. Dynamic Sociology, 2 vols., 1883. 
Tarde, G. La Logique Sociale, 1894. 

Durckheim, E. Les Regies de la Methode Sociologique, 1895. 
Giddings, F. H. Principles of Sociology, 1896. 
Patten, S. N. The Theory of Social Forces, in Annals of American 

Academy of Political and Social Science, January, 1896. 
Ratzenhofer, G. Die Soziologische Erkenntnis, 1898. 
Small, A. W. The Meaning of Social Science, 1910. 



334 THE DEVELOPMENT OF ECONOMICS 



B. ECONOMIC LITERATURE. I— SECONDARY WORKS 

1. Histories of Ecokomics 

General 

Note — Books marked with an asterisk (*) are specially desirable for Ameri- 
can readers. 

* Cossa, L. Guida alio Studio dell' Economia Politica, 1877; transl. 

into English by Dyer, L., from third Italian edition; 1893. 

* Haney, L. H. History of Economic Thought, 1911; revised edition 

of 1920. 

* Ingram, J. K. A History of Political Economy, 1888; latest edition, 

1920. 

Kautz, J. Geschichtliche Entwicklung der Nationalokonomie und 
Ihrer Literatur, 2 vols., 1860. 

Rambaud, J. Histoire des Doctrines :&conomiques, 2 vols., 1898; edit, 
of 1902. 

Tw^iss, T. View of the Progress of Political Economy in Europe 
Since the Sixteenth Century, 1847. 

Cohn, G. History of Political Economy, in AnnaLs of the American 
Academy of Political and Social Science, vol. 4, 1894, a transla- 
tion of Cohn's historical sketch in his System der Nationaloko- 
nomie, 2 vols., 1885. 

Period up to 1776 
Dubois. A. Precis de I'Histoire des Doctrines ficonomiques, vol. 1, 

1903. 
Oncken, A. Geschichte der Nationalokonomie, 1902. 

Period Since 1776 

Block, M. Les Progres de la Science ficonomique depuis Adam 
Smith, 2 vols., 1890. 

* Gide, Ch., et Rist, Ch. Histoire des Doctrines :&conomiques depuis 

les Physiocrates jusqu' a nos Jours, 1909. Translated into Eng- 
lish from French edit, of 1913 by Richards, R., 1915. 

Special Phases and Countries 

* Bonar, J. Philosophy and Political Economy in Some of Their 

Historical Relations, 1893. New edit, in 1909. 

Boehm-Bawerk, E. von. Kapital und Kapitalzins, 2 vols., 1884-89; 
transl. by Smart, W., into English, 1891. 

Cannan, E. A History of the Theories of Production and Distribu- 
tion in English Political Economy from 1776 to 1848, 1893. New 
edition, 1903. 

Davenport, H. J. Value and Distribution, A Critical and Construc- 
tive Study, 1908. 

Denis, H. L'histoire des Systemes ficonomiques et Socialistes, 2 vols., 
1904-07. 

*Higgs, H. The Physiocrats, 1897. 

* Patten, S. N. The Development of English Thought, 1899. 



A WORKING BIBLIOGRAPHY 335 

* Price, L. L. A Short History of Political Economy in England, 

1890; 4. edit., 1903. 
Roche-Agussol, M. Etude Bibliographique des Sources de la 

Psychologie Economique chez les Anglo- Am6ricains, 1919. 
Roscher, W. Geschichte der Nationalokonomik in Deutschland, 1874. 
SchmoUer, G. Merkantilismus und Seine Historische Bedeutung, 1884, 

transl. in Economic Classics, edited by Ashley, W. J. (Macmillan 

Company). 

* Small, A. W. The Cameralists, 1909. 

2. Periodicals 
United States 

American Economic Association: Reports of Proceedings of Annual 
Meetings, 1886- ; Monographs published between 1886 and 1910; 
Economic Bulletin, Quarterly, 1908-10; American Economic Re- 
view, 1910- 

Annals of the American Academy of Political and Social Science, 
1890- 

Columbia University Studies in History, Economics, and Public Law, 
1891- 

Journal of Political Economy, published for the Univ. of Chicago, 
1892-1913, and since 1913 by Western Economic Society. 

Political Science Quarterly, edited by the Faculty of Political Science 
of Columbia University, 1886- 

Quarterly Journal of Economics, published by Harvard Univ., 1886- 

Univ. of Pennsylvania Series in Political Economy and Public Law, 
1888. 

The Yale Review (Quarterly), 1892- 

Germany 

Zeitschrift fUr die Gesammte Staatswissenschaft (Quarterly), 1844- 
Jahrbiicher fiir Nationalokonomie und Statistik (Monthly), 1863- 
Annalen des Deutschen Reichs fiir Gesetzgebung, Verwaltung und 

Volkswirthchaft (Monthly), 1868- 
Jahrbuch fiir Gesetzgebung, Verwaltung und Volkswissenschaft 

(Quarterly), 1877- 

England 
The Economic Journal (Quarterly), 1890- 

France 

Journal des :6conomistes (Monthly), 1843- 
Revue d'Economie Politique (Monthly), 1887- 

Italy 
Giornale deli Economisti (Monthly), 1875-78, and 1886- 

3. Cyclopedias 

Conrad, Elster, Lexis, and Loening. Handworterbuch der Staats- 

wissenschaften, latest edition, 1908-12. 
Elster, L. Worterbuch der Volkswissenschaft, 2. edit, of 1907. 



336 THE DEVELOPMENT OF ECONOMICS 

Palgrave, R. H. I. Dictionary of Political Economy, 1894-99, and 

Supplements. 
Say, Leon, and Chailley. Nouveau Dictionnaire d'ficonomie 

Politique, 1891-92. 

B. ECONOMIC LITERATURE. II— SOURCES 
1. Eighteenth Century: Doctrinal 

a. English 

Hume, D. Political Discourses, 1752. 

Cantillon, R. Essay upon the Nature of Commerce in General. Re- 
printed for Harvard University by Ellis, G. H., Boston, 1892. 

Steuart, J. An Inquiry into the Principles of Political Economy 
. . . , 1767. 

Smith, A. An Inquiry into the Nature and Causes of the Wealth 
of Nations, 1776. 

Smith, A. Lectures on Justice, Police, Revenue, and Arms . . . 
(from a student's notes reported in 1793), edited by Cannan, E., 
1896. 

Smith, A. Essays on Philosophical Subjects, 1795, edited by Black, J., 
and Hutton, J. 

Note — Among books on the antecedents of Adam Smith one of the most 
useful to start with is : Hasbach, W. Die Allgemeinen Philosophischen 
Grundlagen der von F. Quesnay und Adam Smith Begruendeten 
Politischen okonomie, 1890. See also : Small, A. W., Adam Smith 
and Modern Sociology, 1907. 

b. German 

Justi, J. H. G. von. Staatswirtschaft, oder Systematische Abhandlung 
aller okonomischen und Kameralwissenschaften, 1755, 2 vols. 

Sonnenfels, J. von. Grundsaetze der Polizei, der Handlung, und der 
Finanz, 1765, 3 vols. 

c. French 

Quesnay, F. Articles on Fermiers and on Grains, 1756-57. 

Quesnay, F. Tableau £conomique, 1758. 

Quesnay, F. Maximes Generales du Gouverneraent ficonomique d'un 

Royaume Agricole, 1763. 
Mirabeau, Marquis de. Philosophie Rurale ou Economic Generale et 

Politique de 1' Agriculture, 1763. 
Turgot, A. R. J. Reflexions sur la Formation et Distribution des 

Richesses, 1769; English version in Economic Classics edited by 

Ashley, W. J., Macmillan Company, 1898. 
Baudeau, N. Premiere Introduction a la Philosophie ficonomique, 

1771. 

Note — A collection of the most notable works of the Physiocrats will 
be found in : Daire, E., Collection des Principaux Economistes, 1846. 
See also edition of Dupon de Nemours, Physiocratie, 1767-78, 2 vols., 
and Oncken, A„ Oeuvres Economiques et Philosophiques , 1888. 



I 



A WORKING BIBLIOGRAPHY 337 



2. NiKETEEKTH CeKTUEY 

a. Methodology 
English 

Malthus, Th. R. Definitions in Political Economy, 1827. 

Mill, J. S. Unsettled Questions of Political Economy, 1844 (written 

1829-30), especially essay on the Definition of Political Economy 

and on the Method of Investigation Proper to It. 
Mill, J. S. A System of Logic, 1843; especially Book Six. 
Senior, W. N. Introductory Lectures on Political Economy, 1852. 
Cairnes, J. The Character and Logical Method of Political Economy, 

1857. 
Jevons, W. S. The Theory of Political Economy, 1871 (revised 1879), 

especially chs. 1-3. 
Jevons, W. S. The Progress of the Mathematical Theory of Political 

Economy . . . , in Transactions of the Manchester Statistical 

Society, 1874. 
Jevons, W. S. Principles of Science, 1874, passim. 
Ingram, J. K. Present Position and Prospects of Political Economy, 

1878. 
Leslie, Th. E. C. Philosophical Method of Political Economy, 1876, 

reprinted in Essays in Political and Moral Philosophy, vol. 1, 1879. 
Bagehot, W. The Postulates of English Political Economy, 1880. 
Sidgwick, H. Principles of Political Economy, 1883, Introduction 

dealing with Scope and Method of Political Economy. 
Edgeworth, F. Y. Mathematical Psychics, 1885. 
Marshall, A. Present Position of Economics, 1886. 
Marshall, A. Principles of Economics, 1890, pp. 50-100. 
Keynes, J. Scope and Method of Political Economy, 1891. 
Stephen, L. Social Rights and Duties, 2 vols., 1896, containing among 

others two addresses, one on Science and Politics, and another on 

The Sphere of Political Economy, in vol. I. 
McLeod, H. D. History of Economics, 1896, Introduction. 

French 

Say, J. B. Traite d'Economie Politique, 2 vols., 1803, Introduction. 

Proudhon, P. J. Systeme des Contradictions ficonomiques, ou Phi- 
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Baudrillart, H. Des Rapports de la Morale et de r:&conomie Poli- 
tique, 1860. 

Dameth, H. Introduction a I'Etude de I'Economie Politique, 1865. 

Cauwes, P. Cours d'Economie Politique, 4 vols., 1878- ; vol. 1, pp. 
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Block, M, Les Progres de la Science Economique depuis Adam Smith, 
2 vols., 1890, vol. 1, pp. 1-80. 

German 

Roscher, W. Grundriss zu Vorlesungen iiber die Staatswissenschaft 
nach Geschichtlicher Methode, 1843, Preface, a translation of 
which is given in Quarterly Journal of Economics, Oct., 1894. 



338 THE DEVELOPMENT OF ECONOMICS 

Roscher, W. System der Volkswirtschaft, vol. 1: Grundlagen der 
Nationalokonomie, 1854. Many editions, the thirteenth being 
translated into English by Lalor, J, J,, with an introduction on 
the Historical Method in Political Economy by Wolowski, L. ; 
published by Callaghan & Co., Chicago, 1878. 

Marx, K. Misere de la Philosopliie, 1847, ch. 2. English version by 
Quelch, H., publication of Kerr (Ch.) & Co., 1920. 

Hildebrand, B. Die Nationalokonomie der Gegenwart und Zukunft, 
1848. 

Knies, K. Die Politische okonomie vom Standpunkt der Geschicht- 
lichen Methode, 1853; edit, of 1881-83 under changed title. 

Pickford, E. Einleitung in die Wissenschaft der Politischen 
okonomie, 1860. 

Schaeffle, A. E. F. Nationalokonomie, 1860; third edition under 
changed title. See especially the Introduction. 

Schmoller, G. tJber einige Grundfragen des Rechts und der Volks- 
wirtschaft, 1875. 

Schmoller, G. tJber die Idee der Gerechtigkeit ... in Jahrbuch 
fiir Gesetzgebung, Verwaltung und Volkswissenschaft, 1881 
(transl. in Annals of the American Academy of Political and 
Social Science, 1894). 

Engels, F. Diihrings Umwalzung der Wissenschaft, 1878. 

Dietzel, H. tJber das Verhaltnis der Volkswirtschaftslehre zur So- 
zialwissenschaftslehre,|1882. 

Dietzel, H. Beitrage zur Methodik der Wirtschaftswissenschaft, in 
Conrad's Jahrbuecher fiir Nationalokonomie und Statistik, 1884. 

Dietzel, H. Theoretische Sozialokonomik, 1895, in Wagner's (A.) 
Handbuch, vol. II. 

Menger, C. Untersuchungen iiber die Methode der S'ozialwissenschaft, 
1883. 

Menger, C. Die Irrthiimer des Historismus, 1884. 

Menger, C. Grundziige einer Klassifikation . . . , Conrad's Jahr- 
buecher, 1889. 

Wundt, W. Logik, 3 vols., 1883-4, especially vol. 2. 

Sax, E. Das Wesen und die Aufgabe der Nationalokonomie, 1885. 

Stein, O. Vergangenheit, Gegenwart und Zukunft der Nationalen 
Wirtschaftspolitik, 1885. 

Philippovich, E. von. Aufgabe und Methode der Politischen 
okonomie, 1886. 

Wagner, A, Present State of Economics, a digest in the first volume 
of Quarterly Journal of Economics (Harvard Univ.) of an 
article by Wagner in Jahrbuecher fiir Nationalokonomie, etc., 
1886. 

Gottl-Ottlilienfeld, F. von. Die Herrschaft des Wortes ...» 1901. 

Boehm-Bawerk, E. von. The Historical versus the Deductive Method 
in Political Economy, Annals of the American Academy of 
Political and Social Science, vol. I, 1890. 

Schumpeter, J. Wesen und Hauptinhalt der Theoretischen Na- 
tionalokonomie, 1908. 



A WORKING BIBLIOGRAPHY 339 

Italian and Spanish 

Cossa, L. Guida alio Studio dell' Economia Politica, 1877; English 

translation by Dyer, L., 1893; pp. 1-110. 
Ricca-Salerno, G. Del Metodo in Economia Politica, 1878. 
Messedaglia, A. L'economia Politica in Relazione alia Sociologia e 

quale Scienza a s^, 1891. 
Cossa, E. Del Consumo delle Richezze, 1898. 
Carreras y Gonzalez. Philosophic de la Science ficonomique, 1881. 

American. Books 

Carey, H. C. Principles of Social Science, 3 vols., 1858-59, vol. 1. 

Carey, H. C. Unity of Law, 1872, chs. 1-5. 

Walker, F. A. Political Economy, 1883, Part I. 

Newcomb, S. Principles of Political Economy, 1885, Book I. 

American. In Journals 

Ely, R. T. Past and Present of Political Economy, in Johns Hopkins 

Univ. Studies, 1884, vol. 2. 
Giddings, F. H. The Sociological Character of Political Economy, in 

Publications of the American Economic Association, 1888, vol, 3. 
Ward, L. F. The Psychological Basis of Social Economics, in Annals 

of the American Academy of Political and Social Science, 1893, 

vol. 3. 
Sherwood, S. The Philosophical Basis of Economics, ibidem, 1897, 

vol. 10. 
Veblen, Th. Why Economics is not an Evolutionary Science, in 

Quarterly Journal of Economics, 1898, vol. 12. 
Veblen, Th. Preconceptions of Political Science, ibidem, 1899. 
Tuttle, C. A. The Fundamental Economic Principle, Annals of the 

American Academy of Political and Social Science for 1901. 
Hawley, F. B. A Positive Theory of Economics, in Annals of the 

American Academy of Political and Social Science for 1902. 

b. On Principles 

English 

Lauderdale, Lord. Inquiry into the Nature and Origin of Public 

Wealth, 1804. 
Ricardo, D. Principles of Political Economy and Taxation, 1817. 
Malthus, Th. R. Principles of Political Economy, 1820. 
Thompson, W. An Inquiry into the Principles of the Distribution 

of Wealth Most Conducive to Human Happiness . . . , 1824. 
McCulloch, J. R. Principles of Political Economy, 1825. 
Whately, R. Introductory Lectures on Political Economy, 1831. 
Senior, W. N. An Outline of the Science of Political Economy, 

1836 (article in the Encyclopedia Metropolitana, reprinted in 

book-form thereafter). 
Mill, J. S. Principles of Political Economy, with Some of Their 

Applications to Social Philosophy, 1848. 
Mill, J. S. Autobiography, 1873. 



340 THE DEVELOPMENT OF ECONOMICS 

Jennings, R. The Natural Elements of Political Economy . . . 

1855. 
Ruskin, J. Munera Pulveris, 1862. 
Hearn, W. E. Plutology, 1864. 

Rogers, J. E. Th. Manual of Political Economy, 1868. 
Jevons, W. S. The Theory of Political Economy, 1871, with notable 

additions in edition of 1879. 
Cairnes, J. E. Some Leading Principles of Political Economy Newly 

Expounded, 1874. 
Sidgwick, H. The Principles of Political Economy, 1883. 
Marshall, A. Principles of Economics, 1890. 

Nicholson, J. S. Principles of Political Economy, 3 vols., 1893-1901. 
Hobson, J. A. The Economics of Distribution, 1900. 

French, Swiss, and Belgian 
Say, J. B. Traite d'Economie Politique, 2 vols, 1803. 
Say, J. B. Cours Complet d'Economie Politique Pratique, 6 vols., 

1828-30. 
Sismondi, J. Ch. Simonde de (Swiss). Nouveaux Principes 

d'Economie Politique, ou de la Richesse dans ses Rapports avec 

la Population, 1819. 
Saint Simon, H. R. de. Du Systeme Industriel, 1821. 
Dunoyer, Ch. Nouveau Traite d'Economie Sociale, 1830. 
Cournot, A. Recherches sur les Principes Mathematiques de la 

Theorie des Richesses, 1838 (transl. by Bacon, N. T.,.in Economic 

Classics edited by Ashley, W. J., Macmillan Company, 1897). 
Bastiat, F. Harmonies Economiques, 1850. 
Molinari, G. de. Cours Usuel d'ficonomie Politique, 1855-63. 
Courcelle-Seneuil, J. G. Traite Theoretique et Pratique d'Economie 

PoHtique, 2 vols., 1858-59. 
Cherbuliez, A. E. (Swiss) Precis de la Science ficonomique et de 

ses Principales Applications, 2 vols., 1862. 
Walras, L. Elements d'Economie Politique Pure, 1874-77. 
■• Walras, L. Theorie Mathematique de la Richesse Sociale, 1883. 
Laveleye, E. de (Belgian). Elements d'Economie Politique, 1882. 
Cauwes, P. Cours d'Economie Politique, 4 vols., 1878-1883. 
Gide, Ch. Principes d'Economie Politique, 1884. (See also American 

text of D. C. Heath and Company, Publishers, based on third 

French edition.) 
Guyot, Y. La Science :&conomique, 1885. 

Le Play, F. L'Organisation du Travail, 1870, adapted from La Re- 
forme Sociale en France . . . , 3 vols., 1864. 
Leroy-Beaulieu, P. Traite Theoretique et Pratique d'Economie 

Politique, 5 vols., 1895. 
Bourgeois, L. La Solidarite, 1897. 
Colson, L. C. Cours d'Economie Politique . . . , 6 vols., 1901-08. 

German and Austrian 
Sartorius, G. Abhandlungen die Elemente des Nationalreichtums 

Betreffend, 1806. 
Hufeland, G. Neue Grundlegung der Staatswirtschaftskunst, 1807-13. 



A WORKING BIBLIOGRAPHY 341 

Miiller, A. Notwendigkeit einer theologischen Grundlage der Staats- 

wissenschaften, 1819. 
Thiinen, J. H. von. Der Isolirte Staat in Beziehung auf Landwirt- 

schaft und Nationalokonomie . . . , 1826-63, 3 vols. 
Rau, K. H. Lehrbuch der Politischen okonomie, 1826, 3 vols. ; editions 

of the author himself up to 1868. 
Herrmann, F. B. W. von. Staatswirtschaftliche Untersuchungen, 

1832. 
List, F. Das Nationale System der Politischen okonomie, 1841. 
Roscher, W. Grundriss zu Vorlesungen iiber die Staatswissenschaft 

nach Geschichtlicher Methode, 1843. 
Roscher, W. System der Volkswirtschaft, 4 vols., 1854-86. 
Knies, K. Die Politische okonomie vom Standpunkte der Ges- 

schichtlichen Methode, 1853; new edition with changed title in 

1881-83. 
Gossen, H. H. Die Entwicklung der Gesetze des Menschlichen 

Verkehrs, 1854. 
Marx, K. Zur Kritik der Politischen okonomie, 1859. 
Marx, K. Das Kapital, 3 vols., 1867-94. The best single volume study 

of the antecedents of Marx's economics is: Hammacher, E. Das 

Philosophisch-okonomische System des Marxismus. 1909. 
SchaiHe, A. E. F. Die Nationalokonomie, 1861; entitled Das Gesell- 

schaftliche System der Menschlichen Wirtschaft in edition of 1873. 
Menger, C. Grundsatze der Volkswirtschaftslehre, 1871. 
"Wagner, A. Lehrbuch der Politischen okonomie, 8 vols., 1876-93. 
Wagner, A. Theoretische Sozialokonomik, 1907. 
Wieser, F. von. Ursprung und Hauptgesetze des Wirtschaftlichen 

Werthes, 1884. 
Wieser, F. von. Der Natiirliche Wert, 1889. 

Launhardt, W. Mathematische Begriindung der Volkswirtschafts- 
lehre, 1885. 
Boehm-Bawerk, E. von. Positive Theorie des Kapitals, 1888. 
Philippovich, E. von. Grundriss der Politischen okonomie, 1888. 
Cohn, G. System der Nationalokonomie, 2 vols., 1885-89. 
SchmoUer, G. Grundriss der Allgemeinen Volkswirtschaftslehre, 2 

vols., 1901-04. 

Dutch 
Pierson, N. G. Leerboek der Staathuishoudkunde, 2 vols., 1884-90. 

Italian 

Gioja, M. Nuovo Prospetto delle Scienze Economiche, 6 vols., 1815-17. 
Bianchini, Lod. Delia Scienza del ben Vivere Sociale e della 

Economia degli Stati, 1845-55. 
Boccardo, G, Trattato Teorico-Practico d'Economia Politica, 3 vols., 

1853. 
Nazzani, E. Sunto di Economia Politica, 1873. 

Lampertico, F. Economia dei Populi e degli Stati, 4 vols., 1874-84. 
Cossa, L. Elemehte di Economia Politica, 1876. 
Pantaleoni, M. Principii di Economia Pura, 1889; English translar 

tion by Bruce, T. B., 1898. 
Cossa, E. Le Forme Naturale della Economia Sociale, 1890. 



342 THE DEVELOPMENT OF ECONOMICS 

Loria, A. La Terra ed il Sistema Sociale, 1892. 
Pareto, V. Cours d'£iconomie Politique, 1896. 

American {Up to 1910) 
Raymond, D. Political Economy, 1820. 
Rae, J. Statement of Some New Principles on the Subject of 

Political Economy, Exposing the Fallacies of the System of 

Freetrade . . . , 1834; reprinted under editorship of Dr. Mixter, 

C. W., under title of The Sociological Theory of Capital, 1905. 
Wayland, F. Elements of Political Economy, 1837. 
Carey, H. C. Principles of Political Economy, 8 vols., 1837-40. 
Smith, E. P. Manual of Political Economy, 1853. 
Bowen, F. Principles of Political Economy, 1856; under new title, 

1870. 
Perry, A. L. Elements of Political Economy, 1866; under new title, 

1891, 20. edit. 
George, H. Progress and Poverty, 1879. 
George, H. Science of Political Economy, 2 vols., 1898 (posthumous 

and unfini'^hed). 
Walker, F. A. Political Economy, 1883. 
Newcomb, S. Principles of Political Economy, 1885. 
Clark, J. B. The Philosophy of Wealth, 1886. 
Clark, J. B. The Distribution of Wealth, 1899. 
Ely, R. T. Introduction to Political Economy, 1889. 
Ely, R. T. Outlines of Economics, 1893; enlarged editions of 1908 

and 1916, in collaboration with Adams, Th. S., Lorenz, M. O., and 

Young, A. A. 
Patten, S. N. Consumption of Wealth, 1889. 
Patten, S. N. Dynamic Economics, 1892. 
Patten, S. N. The Theory of Prosperity, 1902. 
Commons, J. R. The Distribution of Wealth, 1893. 
Davenport, H. J. Outlines of Economic Theory, 1896. 
Bullock, C. J. Introduction to the Study of Economics, 1897. 
Carver, Th. N. The Distribution of Wealth, 1904. 
Seager, H. R. Introduction to Economics, 1904; under new title in 

1913. 
Fetter, F. A. Principles of Economics, 1904. 
Veblen, Th. B. The Theory of Business Enterprise, 1904. 
Seligman, E. R. A. Principles of Economics, 1905. 
Taussig, F. W. Principles of Economics, 2 vols., 1911 (revised edit. 

1914, 3. edit. 1921). 



INDEX 



Ago-theory of interest, 310 
American economics, rise of, 

244 ff. 
Association of ideas, basis for 

ethics, 37, 251,-9 

Bacon, F., on induction, 81 

Bastiat, on natural harmonies, 
183-4 

Bentham, his hedonism, 123-4 
Influence on Thompson, W., 
194 

Boehm-Bawerk, defining capital, 
291 
on interest rates, 310 

Bowen, F., on premises of eco- 
nomics, 149 

Cairnes, on Laissez Faire 
Capital, according to Physio- 
crats and Smith, 165 
as savings, 178 
according to Socialists, 205 
according to Marginists, 291-2 
Carlyle, Th., on competitive 

regime, 198 
Carey on mathematical method, 

283 
Causes, Mill, J. S., on composi- 
tion of, 132, 135-8 
as price determinant, 301-2 
Chalmers, defining economics, 159 
Circulating capital, 165-6 
Clark, J. B., on natural value, 

300 
Collectivism defined, 186 

in France since 1750, 189 if. 
Comte, influence on J. S. Mill, 
138-40 
and Historical School, 209 
on social science method, 274 



Consumption, place in economics, 
154 and Table 2 
defined by utilitarian eco- 
nomics, 167 fl". 
according to marginism, 294 
Cost, according to physiocrats, 
69-70 
defined by utilitarians, 170 
from marginal standpoint, 290, 

293, 302-3 
as long-run minimum, 304 
Cournot, on mathematical method, 
282 



Davenport, ethics and economics, 
264-5 
on capital, 292 
Deduction, Mill's view, 137-8 
Jevons' view, 243, 278 
Menger's view, 279 
Desirability as the good 

(Hobbes), 34 
Desire, through ideas, 33 

transferred through association 
of ideas, 253-55 
Diminishing returns, not peculiar 
to agriculture, 177 
according to marginism, 296-7, 
298 
Diminishing utility, Paley's state- 
ment, 251 
Distribution, place in economics. 
Table 2 
as struggle for surplus, 177 
marginal analysis, 305 
Divisional arrangement of eco- 
nomic treatises, 152-5, and 
Table 2 
Donisthorpe, on aim of econom- 
ics, 160 



343 



344 



INDEX 



Dynamics, in Historism, 209 
according to Clark, J. B., 276 
according to Fetter, 277 

Economic interpretation of his- 
tory stated, 5-6 
rejected, 6 ff. 
Marxian view, 2012 
"Economic man," Ricardian no- 
tion, 119 
Economists as philosophers, 102-3 
Economics, systematized by Say, 
110-12 
as catallactics, 145-6 
as a hedonistic calculus, 255-6 
Economics, theory and commer- 
cial policy, 180 
Empiricism, doctrine, 29 

bearing on rise of economics, 
30-1 
Epicureanism, chief points, 40 

influence on economics, 42 
Ethics, according to Hobbes, 
42-4 
according to Locke, 45-6 
in relation to economic theory, 

120, 156 ff. 
according to Historism, 217-19 
according to Marginism, 260 ff. 
Expenses, not equal to price, 303 
defined, 303-4 

Factor, of production. Marginal 
view, 295 
law of proportionality, 296-8 
Feelings, measurable by price, 257 

comparable for all men, 258 
Ferguson, A., on Laissez Faire, 

50, 87 
Fetter, on dynamic elements, 277 
on rent and law of proportions, 
309 
Field of economics. Marginal 
view, 265 ft\ 
Menger's view, 271-2 
inclusive of "applied" eco- 
nomics. Table 4 
Fisher on place of interest-theory 

in economics, 311 
Free-trade discussed by econo^- 
mists, 180 



German economists and Smith, 

106-9 
Godwin, W., on private property, 

193 
Gossen, chief doctrines. Table 3, 
236 ff. 
opposed to imputation, 239 
discussing price-levels, 240-1 
Greek ethics and eighteenth cen- 
tury thot, 39-41 

Hartley, ethical views, 121-3 
Hedonism, in Hobbes, 42-5 

in Locke, 45-6 

and French materialism, 123 

in Jennings' economics, 251-2 

either ethical or psychological, 
254 

as basis of Marginism, 259 
Hegel, genetic views, 103-5 

influence on Marx, 199-201 
Historiography, rise of, 59 
Historism, as economics, 186-7 

on ethics, 188 

relation to Socialism, 205-7 

its roots, 207-9 

chief economic doctrines, 212 ff. 

its organic view of society, 214- 
6; 230-1 

as a German national move- 
ment, 220-1 

its general contributions, 225 
Historical vs. deductive method 

(Menger), 271-2 
Hobbes, as materialist, 31 

as psychologist, 32-4 

on ethics, 42-5 

on logic, 81-2 

on subjectivity of value, 250 
Hodgskin, critic of Utilitarian- 
ism, 195 
Human motives, according to 
Wagner, 219 

according to Jevons, 278 
Hume, on psychology, 36 ff. 

on ethics, 47 

on scientific method, 83 

Ideas, derived thru senses, 32-5 
according to Hume, 36 
as basis of desire, 255 



INDEX 



345 



Impatience theory of interest, 

310 
Imputation, in marginal distribu- 
tion, 305 ff. 
and ethics, 308 
Induction, Jevons' view, 278 
Industrial evolution, effects of, 

95-6 
Ingram, on mathematical method, 

285 
Interest, not a share in static 
economics, 310 
Jevons' productivity view, 310 
its significance (Fisher), 311 

Jennings, on subjectivity of 
value, 239 
psychological views, 252-3 

Jevons, chief doctrines. Table 3 
productivity theory of wages, 

235 
relation of utility to price, 243 
on ethics of hedonism, 254, 262 
on basis of impatience, 256 
on feelings as basis of price, 

257-8 
on human motives, 278 
on mathematical method, 284 
on law of price, 304 

Justi, 28 

Kameralism, defined, 26 

in Germany, 27 
Keynes, on universal economic 
law, 171 
on ethics and economics, 264 
on economic method, 280, 285 
on consumption as divisional 
unit, 294 
Knies, on economic methods, 213 

Labor, as measure of price, 171 
not a measure of price, 182, 
299 
Hodgskin's view relative to 

capital, 196 
Socialist view, 204-5 
Laissez Faire, Smith's argument, 

75-80 
as postulate for Utilitarianism, 

183 



Law in economics, Keynes on law, 
171 

Marginal view, 267 

compared with historical sci- 
ence, 270-1 
List, F., chief doctrines, 210-12 
Lloyd on value, 230 
Locke, his psychology, 35 ff, 

his ethics, 45-6 

on scientific method, 82 

McCulloch, on consumption, 167 
MacLeod, on subjectivity of 

value, 230 
Malthusianism, use of theory and 
its decline, 176-81, passim 
for state interference, 237 
Marginal utility, interchangeable 

with other doses, 300 
Marginism, defined, 226-8 
early teachings, 231, 236 
compared with Utilitarianism, 

228, 322-3 
of earliest expounders. Table 3 
not related to experimental 

psychology, 242 
its development after 1880, 

248 ff. 
its psychology, 249 ff. 
attitude on ethics, 260 
its methodology, 265 
as a science of values, 267 
a deductive science, 277-8 
an entrepreneur view, 287 
its chief laws, 295 ff. 
its price analysis, 322-3 
Market, defined by Marginism, 

293 
Marshall, ethics and economics, 
264 
on mathematical method, 285 
Mathematical method, note on, 
281 ff. 
meanings of, 283 
Menger, main doctrines, Table 3 
on imputed values, 239 
on ethics and economics, 262, 

263 
defining economics, 266 
methodology, 269 ff. 
favoring deduction, 279 



346 



INDEX 



Mercantilism defined, 26 
Methodology, of Smith, 83-5 

of J. S. Mill, 130 ff. 

of Historism, 213-5, 232-4 

of Marginism, 265 ff. 

best in J. S. Mill, 143-5, 270 
Mill, Jas., psychology, 125-7, 252 
Mill, J. S., as psychologist, 31, 33, 
135 (chart) 

position on utilitarian ethics, 
126-7 

an eclectic, 128-9 

his methodology, 130 if. 

creator of economic logic, 141-5 

on value, 163 

on wages-fund, 178-9 

on Socialism, 197 
Monopoly law of price, 302 

Naturalism, in ethics, 38 ff. 
political philosophy, 50 ff. 
in physiocracy, 62 ff. 
in A. Smith, 72 ff. 

Organic view of society (His- 
torism), 214-6 

Pain-pleasure, as basis for ethics, 
42-6, 251-2 

in Ricardian economics, 119-20 
as basis for valuation, 254 ff. 
Paley, on natural law, 53 
on diminishing gratification, 
251 
Pantaleoni, on hedonistic basis of 
economics, 259 
on law of proportions, 297 
Paradox of value, 238 
Pareto on economic statics, 275 
Philippovich, on subdivisions of 
economic science, 261-2 
on capital, 292 
Physiocrats, influenced by sto- 
icism, 42, 63 
as founders of social science, 

62, 319 
and naturalism, 62-5 
economic doctrines, 68 ff. 
Pierson on consumption in eco- 
nomics, 294 



Political economy as art, accord- 
ing to some Utilitarians, 
157-9 
according to Caryle, 198 
Premises, economic, specified by 

Utilitarians, 147-50 
Price, as labor-cost, 171-2 
as supply and demand, 173-4 
not a basis for distribution, 

182 
as an average of want inten- 
sities, 242 
from Marginal standpoint, 

299 ff. 
Utilitarian and Marginal com- 
pared, 322 
Prices functionally related 

(Walras), 238, 242 
Production, Physiocratic view, 
68-9 
Smith's view, 88 
Say's view, 112 
defined by Utilitarians, 167 
defined by Marginists, 290-1 
as a division of economics. 
Table 2 
Productivity, Utilitarian view, 
174 
Marginal view, 296 
as theory of wages, 306 
Progress, according to Smith, 
89-90 
Socialist view, 202-3 
view of Historism, 223 
Property, private, limited by 
British economists, 193 
Marxian view, 202 
as background to economic an- 
alysis, 291 
Proportions, law of, Pantaleoni's 
statement, 297 
Carver's statement, 298 
bearing on rent (Fetter), 309 
Psychology of Naturalism, 28 ff. 
Utilitarianism, 118 ff. 
Marginism, 248 ff. 

Quetelet, 215 

Rationalism in philosophy, 29 
Renaissance spirit, 17 ff. 



INDEX 



347 



Rent, Ricardian, 175-6 

criticized by Utilitarians, 182 

Marginal view, 308-9 
Representative firm, 303 
Ricardo and Smith, 113-5 

on labor-laws, 177 
Rodbertus as critic of Utilitari- 
anism, 199 

Say, J. B., 110-3 
Schoenberg, on ethics in eco- 
nomics, 159 
on economic laws, 268 
Schumpeter, on chief economic 
problem, 267-8 
on statics, 276 
Science, rise of, 23-4 

advance after 1776, 100 ff. 
Seager, on price-law, 301 
Seligman, on monopoly price, 302 
Senior, on economic premises, 
147-8 
on ethics in economics, 159-60 
Sensationalism, up to Hume, 
31 ff. 
in Utilitarian economics, 124 ff. 
in Marginal economics, 251-2 
Shaftesbury (Third Earl of) on 

morality, 49 
Sismondi, 191 if. 
Smith, A., sources of his ethics, 
49, 79 
his psychology, 75 
his Naturalism, 75-7 
argument for Laissez Faire, 

75-80, 89 
idea of sympathy, 80 
induction in his work, 83-4 
on prosperity, 86-8, 90 
on free-trade, 89 
chief economic points, 88 flf., 

114 
compared with Ricardo, 114, 

322 
influence of his "Wealth," 105- 

8, 109 
view of capital, 165 
Smith, E. P., on consumption, 

168 
Socialism, Hegelian elements, 
200-1 



Socialism and Historism in eco- 
nomics, 205-9 
Social science, genealogy of (see 
chart), 60 
logical method, 130 if. 
Socio-economic changes during 
16th to 18th centuries, 24-6 
after 1776, 92 ff. 
State interference. Marginal 

view, 237 
Statics, in stoicism, 51 
in Utilitarian economics, 162 
in Marginal economics, 273 
according to Comte and Mill, 

274-5 
related to natural value, 300 
Statistics, rise of, 55 ff. 
and Historism, 214-6 
Steuart, Jas., 85 
Stewart, D., on economics as art, 

157 
Stoicism tenets, 40-1 
influence on early economics, 
50-1 
Structure of economic treatise, 

152-5 
Supply and demand, in Utilita- 
rian price, 173 
of factors and distribution, 
307-8 

Taxation among Physiocrats, 71 
Thiinen, on wages, 179 

Utilitarianism, origins of phi- 
losophy, 48 
defined as economic system, 

117-8 
early psychology, 121-4 
as basis for Marginism, 250-2 
Utility defined by Marginists, 289 

Value, according to Utilitarians, 
162-4 
subjective view, 229-31 
Marginal use of. 288 ff. 
as measure of feelings, 257 
"absolute," 288 
"natural," 299-300 
measured by Marginal utility, 
300-1 



348 



INDEX 



Value, as division in economics, 

Table 3 
Wages, Marginal view, 306 
as ethical issue in imputation, 
308 
Wages-fund and capital, 166, 178 

critics of, 179-81 
Wagner, A., on field of economics, 
146 
on premises of economics, 150 
on human motives, 219 
Walker, F., ethics and economics, 
161 
on consumption, 168 
on profits, 176 



Walras, main doctrines, Table 3 
interrelating prices, 238, 242 
Wealth, Physiocratic view, 69-70 
individual vs. social view, 164, 

165 
Marginal view, 290 
Wicksteed, on ethics in eco- 
nomics, 265 
Wieser, F., comparability of feel- 
ings, 258-9 
natural value, 299-300 
imputation method, 305 fF. 
Wundt, W., on economic postu- 
lates, 150 
on task of economics, 269 



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